Hindustan Zinc Ltd (HZL), the country’s largest integrated zinc producer, is expected to complete the study on creating separate entities for its commodities to unlock ‘potential value’ by November-end. Post completion of the study, it will take up the findings with the board, including the government nominees, CEO, Arun Misra, told businessline.
While the acquisition plans for Vedanta’s overseas mines have now been ‘scrapped’, the company will explore ‘unlocking value’ through the demerger processes.
Earlier this year, the Vedanta-owned company had said it was planning to create separate entities for its zinc, lead, silver and recycling businesses. The company, Misra said, has appointed external advisors for “comprehensive review” of its corporate structure.
The company’s board has reportedly authorised a committee of directors to evaluate and recommend options and alternatives.
The Indian government is the largest minority shareholder in Hindustan Zinc with a 29.54 per cent stake, while Vedanta owns the majority 64.9 per cent.
“Right now we have appointed a consultant to carry out a study and in four to six weeks, say around November second week or so, the report should be ready. Once it’s done, it will state the pros and cons of creating the separating entities, the valuation and all of that,” he said.
Asked if the government nominees on the board are on the same page, Misra said: “Technically I don’t see an issue if the valuations go up. So the Government will continue to hold 29.54 per cent across all the new entities. But to be fair, we have to wait till the report by the committee comes. As and when the report comes, we take it to the board and the Government.”
Earlier, objections from the Centre had stalled Hindustan Zinc’s plans of acquiring overseas zinc mines of parent company Vedanta. The $3-billion deal fell through as Hindustan Zinc failed to get the Centre on board. Being a related party transaction, a majority of the minority shareholders had to accept the acquisition proposal, which didn’t happen.
“Right now there is no word on overseas acquisition proposals (of Vedanta). That is not the focus at the moment either. The important thing is unlocking value for shareholders through the corporate rejig and creation of separate entities,” Misra said.
However, the company continues to explore acquisition possibilities overseas and evaluate independent offers.
Profits dip
Hindustan Zinc reported an over 35 per cent drop in consolidated net profit of ₹1,729 crore for the second quarter of FY24. Net profit in the year-ago period was ₹2,680 crore.
Revenue from operations declined nearly 19 per cent to ₹6,791 crore, compared to ₹8,336 crore in the year-ago-period.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) during the September quarter decreased 29 per cent to ₹3,122 crore.
Zinc cost of production before royalty for the quarter was ₹93,981 per tonne, lower by over 6 per cent y-o-y.
Revenue from operations came down on account of the lower zinc prices, lower zinc and silver volumes and differential strategic hedging impact partly offset by higher lead and silver prices and favourable exchange rates.
Metal Production
Mined metal production for the quarter was 252 kt, down 1.4 per cent y-o-y, mainly due to lower ore production at Rampura Agucha and Kayad mine, partly offset by better overall metal grades.
Refined metal production for Q2FY24 was 241 kt, down 1.8 per cent y-o-y on account of scheduled maintenance activity.
Integrated zinc production for the quarter was 185 kt, down 2.3 per cent, y-o-y. Refined lead production for the quarter was 57 kt, flat as compared to Q2 FY23. on account of pyro plant operations on lead mode during the quarter.
Saleable silver production for the quarter was 181 MT, down 6.8 per cent y-o-y.