Hindustan Zinc Ltd Directors Report.

Dear Members,

The Directors are pleased to inform that Hindustan Zinc delivered strong performance from all our underground mines and many benchmarks in operational performance were set during the year.


We share with you our 53rd Annual Report, together with the Audited Financial Statements for the year ended March 31, 2019. FINANCIAL INFORMATION

र in Crore
Particulars FY 2019 FY 2018
Revenue from operations (net of Excise Duty) 21,118 22,082
Other Income 1,782 1,716
Profit before depreciation, interest and tax 12,452 14,226
Less:Interest 113 246
Less: Depreciation and amortization expense 1,883 1,483
Profit before tax 10,456 12,497
Less: Net tax expense 2,500 3,221
Net profit 7,956 9,276
Earnings per share, र 18.83 21.95


The Company reported ‘Revenue from operations (net of excise duty) including other operating income of र 21,118 Crore, a decrease of 4% y-o-y higher lead & silver volumes and rupee depreciation, offset by lower metal prices and zinc volume.

The ‘Other income was र 1,782 Crore during the year compared to र 1,716 Crore in the previous year on account of higher treasury income due to mark-to-market gains resulting from decline in interest rates, partly offset by decline in investment corpus on account of special interim dividend payment.


Net zinc metal cost per tonne, without royalty, during the year was higher by 11% in INR (3% in USD) at र 70,444 ($1008) MT and was impacted by higher mine development, lower metal volume, higher coal & commodity prices, LTS related expense and rupee depreciation (in case of rupee COP), partly offset by higher acid credits. The Company concluded a five-year long-term settlement with its recognised union impacting cost by $33 per tonne.


The above revenue and production cost resulted in profit before depreciation, interest and tax (PBDIT) of र 12,452 Crore in FY 2019, down 12%. In addition to lower revenue and higher cost of production, operating income was impacted by one-time expense related to LTS arrears.


The Company reported record net profit of र 7,956 Crore,

14% lower than previous year on account for lower PBDIT and higher depreciation, partly helped by lower tax rate.

Depreciation & amortisation has trended up due to higher capitalisation and increased underground ore production resulting in higher amortisation.


The EPS for the year was र 18.83 per share as compared to र 21.95 per share in FY 2018.


On October 22, 2018, the Board of Directors declared a Special Interim Dividend of 1000% i.e. र 20 per share on equity share of र 2 each amounting to र 10,188 Crore (including DDT). The Board has not recommended final dividend for the year.


CRISIL has reaffirmed the Companys long-term rating of AAA/Stable and short-term rating of A1+. The ratings continue to reflect the Companys dominant position in Indias zinc industry, efficient and integrated operations and a strong financial risk profile.

The Company follows a conservative investment policy and invests in high quality debt instruments. As on March 31, 2019, the Companys cash and cash equivalents was र 19,490 Crore invested in high quality debt instruments and the portfolio continues to be rated "Tier-1" implying Highest Safety by CRISIL. During the year, the Company borrowed र 5,000 Crore of short term commercial paper in to meet cash flow mismatch for special interim dividend funding requirement. Of this, र 3,000 Crore of commercial paper was paid off during the year. The net cash and cash equivalents at the end of the year was र 16,952 Crore as compared to र 20,395 Crore at the end of FY 2018.

र in Crore
Particulars FY 2019 FY 2018
Opening Cash* 20,395 23,972
Add: EBITDA** 10,747 12,373
Add: Net Interest Income 1,552 1,329
Less: Income Tax & Dividend 14,518 13,497
Less: Capital Account Payments 3,400 2,733
Add: (Increase) / Decrease in Working Capital & Others 4,714 (1,049)
Closing Cash* 19,490 20,395

(*) Includes Cash & Equivalents (refer Note 11 of the Audited Financial Statements) and Current Investments (refer Note 9 of the Audited Financial Statements)

(**) Earnings before Interest, Tax, Depreciation and Amortization expenses and Income on investments.


Gross working capital represented by inventory, trade receivables and other current assets increased from र 1,956 Crore to र 2058 Crore as at March 31, 2019 primarily due to increase of stores inventory. The working capital cycle was 36 days in FY 2019 as compared to 32 days in FY 2018.


The gross block during the year increased from र 23,879 Crore to र 28,096 Crore. This was largely due to the ongoing mining projects and other sustaining capex.


The total capital employed as at March 31, 2019 was र 16,652 Crore, as compared to र 15,537 Crore at the end of previous fiscal year mainly due to addition in fixed assets.


The Company has contributed र 11,563 Crore during FY 2019, in terms of royalties, taxes and dividends to the Government treasury on cash basis, aggregating to approximately 55% of the total revenue.


The FY 2019 mined metal production was entirely from underground mines, which ramped up strongly by 29% to 936 kt on account of 27% increase in ore production and better grades. The closure of open-cast operations caused total mined metal production to decline marginally by 1% from a year ago.

Integrated metal production was 894 kt, down 7% from a year ago. Zinc production at 696 kt was lower by 12% year- over-year due to lower zinc mined metal availability during the year as underground mines ramped up to fill the vacuum from closure of open-cast operations and higher lead ratio in ore. Integrated lead and silver production were at record 198 kt and 679 MT, higher by 18% and 22% respectively from a year ago driven by higher lead mined metal production, retrofitting of pyro metallurgical smelter in Q2 FY 2019 to produce more lead in line with higher lead mined metal availability and better silver grades.

The Company generated 3,746 million units of power in FY 2019 as compared to 3,817 million units in FY 2018. Total green power generation was 449 million units as compared to 414 million units in FY 2018.


The refined zinc metal sales in the domestic market during the year was 513 kt, while export sales accounted for 181 kt as compared to 515 kt and 278 kt respectively a year ago. The aggregate sales were lower by 12% than previous year, in line with production. Lead metal sales in the domestic market were 154 kt, while export sales were 44 kt leading to higher aggregate sales of 17% from a year ago, in line with increase in lead metal production during the year. Silver sales were 676 MT in FY 2019, all in the domestic market and 21% higher than previous year.


During the year, gross additions of 5.4 million MT were made to reserve & resource (R&R), prior to depletion of 13.8 million

MT. As at March 31, 2019, the combined R&R were estimated to be 403 million MT, containing 34.6 million MT of zinc-lead metal and 965 million ounces of silver. Overall mine life continues to be more than 25 years.


The announced mining projects are nearing completion in line with the target of reaching 1.2 million MT per annum of mined metal capacity in FY 2020.


Capital mine development increased by 12% to 43 km in FY 2019.

At Rampura Agucha underground mine, the ventilation system was commissioned earlier in the year liberating the mine from ventilation issues. The commissioning of mid shaft loading system in October 2018 allowed waste hoisting to be done through the shaft ahead of schedule, leading to improvement in ore production. The second paste fill plant was completed ahead of schedule in Q4 and the mine is equipped with paste fill capacity to support 5.0 mtpa production. The full shaft commissioning is expected to complete by September 2020 synchronising with completion of crusher and conveyor system.

During the year, Sindesar Khurd received environment clearance to produce 6.0 million MT of ore and 6.5 million MT of ore beneficiation. The new 1.5 mtpa mill accomplished smooth commissioning and began production in the third quarter of the year, taking the total milling capacity to 6.2 mtpa. The underground crusher and production shaft were commissioned during Q4 and ore hoisting from shaft is expected to start in Q1 of the current year. The second paste fill plant is under mechanical completion and also expected to commission in Q1 of the current year.

Zawar mines: The new 2.0 mtpa mill was commissioned in Q4 while the dry tailing plant is under execution and expected to commission in Q2 FY 2020.

Rajpura Dariba mine has received Environment Clearance by the Ministry of Environment, Forest & Climate Change to increase ore production from 0.9 to 1.08 mtpa and regulatory approval for further expansion to 2.0 mtpa is under process. Ore production run-rate is already at 1.2 million MT per annum post major infrastructure enhancement. During the year, orders were place for a new 1.5 mtpa mill and paste fill plant which are expected to complete in FY 2020.


The Fumer project at Chanderiya is expected to commission in Q1 of the current year.

22 MW solar plant was completed at Rampura Agucha taking the total solar capacity to 38 MW.

25 MLD Sewage Treatment Project was commissioned at Udaipur taking the total capacity to 45 MLD which will help improve water availability at Dariba and treat over half of Udaipur citys sewage.

Planning is underway for the next phase of expansion to 1.35 million MT per annum.


Both mined metal and finished metal production in FY 2020 will be significantly higher than last year and expected to be about 1.0 million tonnes each. The Company expects to complete the underground mine expansion plan announced in early 2013 by Q2 of the current financial year, quadrupling its underground mined metal production capacity to 1.2 mtpa.

Zinc cost of production in FY 2020 is expected to be under $1000 per MT. The guidance of FY 2020 silver production is in the range of 750 - 800 MT. The project capex for the year will be in the range of US$350 to US$400 million.


Safety, health and sustainability initiatives have been discussed in detail in ‘Business Review, which forms a part of this Annual Report.


The Companys CSR focuses on Education, Sustainable Livelihoods, Women Empowerment, Health & Water, Sports & Culture, Environment and Community Development including Community Assets Creation.

During the year, the Company spent 7 130 Crore on CSR programs as compared to 7 92 Crore in previous year. For further details, refer Annexure 5 and ‘Business Review section of this Annual Report.


During the year under review, Mr. Agnivesh Agarwal resigned as Director and Chairman of the Board on February 22, 2019 after 13 years of being on the Board of Directors. We thank Mr. Agarwal for his leadership and guidance towards the growth of the Company. Mrs Kiran Agarwal was appointed as Additional Director and Chairman of the Board on March 02, 2019.

Mr. Sudhir Kumar, Independent Director and nominee of Government of India, completed his tenure on November 29, 2018. We thank Mr. Kumar for his contribution.


The Business Review section of this Annual Report gives a detailed account of the Companys operations and the market in which it operates, including its initiatives in areas such as human resources, sustainability and risk management.


As a listed company, necessary measures are taken to comply with the listing agreements of the Stock exchanges.

A report on Corporate Governance, along with a certificate of compliance from the statutory auditors, forms part of this report. Further, Business Responsibility Report describing the initiatives taken by your Company from an Environmental, Social and Governance perspective, also forms a part of this report. Various disclosures as required under section 134 and 135 of the Companies Act 2013 are annexed to this report or covered in the Corporate Governance Report, such as Related Party Transactions; Information and details on conservation of energy, technology absorption, foreign exchange earnings and outgo; extract of annual return; constitution of various Board level Committees; Annual Report on CSR.


As required under Section 134(5) of the Companies Act, 2013, the Directors hereby confirm that:

i. In the preparation of the annual accounts, the applicable accounting standards read with requirements set out under Schedule 3 to the Act, have been followed and there are no material departures in the same.

ii. The Directors have selected such accounting policies, applied them consistently and made judgements & estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period.

iii. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv. The Directors have prepared the annual accounts on a ‘Going Concern basis.

v. The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

vi. The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.


The Company had appointed M/s. SR Batliboi & Co. LLP, Chartered Accountants, as Statutory Auditors of the Company to conduct audit of Financial Statements for the year ended March 31, 2019. The Notes to Financial Statement referred to in the Auditors Report are self-explanatory and do not call for any further comments. The Auditors Report does not contain any qualification or reservation. The only adverse remark is for not fulfilling the criteria of adequate number of Independent Directors for which we are in touch with the two major shareholders.

Pursuant to the orders issued by the Central Government under section 148 of The Companies Act, 2013, the Board has appointed M/s K G Goyal & Co. Cost Accountants

for conducting the audit of the cost accounting records maintained by the Company for all its products and M/s Chandrasekaran Associates, Company Secretaries as the Secretarial Auditors for conducting the Secretarial audit of the Company.

As per provisions of Section 136 of the Companies Act, 2013, the Annual Report including the Audited Accounts for the year will be sent to all the Shareholders.


Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached to this report. In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits set out in the said Rules forms part of the Report. However, having regard to the provisions of the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report excluding the aforesaid information is being sent to the Members of the Company. The said information is available for inspection at Registered Office of the Company during working hours. Any member interested in obtaining such information may write to the Company Secretary at the registered office and the same will be furnished on request. Further the details are also available on the Companys website: www.hzlindia.com.


The Board of Directors places on record its sincere appreciation of the contribution made by the employees and the employees unions in the success of the Company. The Directors also sincerely thank the Central Government and the State Governments of Rajasthan, Andhra Pradesh, Gujarat, Karnataka, Tamil Nadu, Maharashtra and Uttarakhand; and the bankers, auditors, vendors, customers and the shareholders of the Company for their continued support.

For and on behalf of the Board of Directors

Sunil Duggal A R Narayanaswamy
CEO & Whole-time Director Director
Camp: London
Place: Mumbai
Date: May 02, 2019

annexure 1

Particulars of technology absorption and foreign exchange earnings and outgo, as per Section 134(3)(m) of the Companies Act, 2013 and the rules made therein and forming part of the Boards Report for the year ended March 31, 2019.


• Trails of DROSRITE™ zinc dross treatment process conducted at zinc melting section of Pantnagar Metal Plant. This process uses the heat generated by the oxidation of unrecoverable zinc metal, in the presence of oxygen, as a source of energy



• Feasibility testing of new technologies like Stage Flotation Reactor (SFR), flash floatation, graphite pre-float and lead re-grinding for suitability in our operations to address ore variability and improve recovery

• Modification in floatation circuit configuration for increase in metal recovery in mills

• Testing of new floatation reagents for improved metallurgical performance and cost benefits

• Plant surveys of grinding and floatation circuit across all mines for optimised plant performance

• Benchmarking of beneficiation plant performance and modelling and simulation studies to strengthen metallurgical accounting at Zawar

• Process development for tailing re-processing to recover metal from tailings

• Conversion of pre-graphite concentrate into saleable graphite product and to recover metal values from pre-graphite concentrate

• Pilot scale testing for 18.75 MT antimony slag was successfully completed. About 3 MT of antimony trioxide of purity >96% and 17 MT of enriched lead residue suitable for internal consumption were generated

• Pilot, scale testing initiated for high grade cobalt cake generation from purification waste cake. The operating parameters have been optimised at lab and bench scale to generate purified cobalt cake of about 20% purity

• Process for recovery of vanadium as ammonium meta vandate from spent acid catalyst validated at lab scale. Replacement of sodium peroxide is being explored

• Cold bricksarebeingpreparedwith3-5%cementand 80% of different wastes used in various composition. Enhancing of brick strength is in progress.

• Process feasibility for magnesium bleeding through zinc dross treatment has done. Bench scale closed loop testing is in progress


• Testing of new technologies suggest that its implementation will increase recovery of lead and silver in case of flash floatation and lead

re-grinding and improve concentrate grade by using SFR and pre-graphite floatation

• Circuit modification in zinc floatation circuit suggests that it will increase zinc recovery by 2%

• Regular plant surveys across all mines gives an idea of plant operating status and any opportunity for improvement thereof

• Metallurgical accounting will help in bridging gap between theoretical and actual recovery

• Tailing re-processing at Rampura Agucha mine will give an extra 3% increase in overall metal recoveries

• 18.75 MT antimony slag treated and total realization of R 25.5 lacs is achieved from pilot plant operation. Expected realization is R 11.5 Crore per annum

• Drosrite process suggests the lmprovement in 1st pass metal recovery by 0.35%. Also the final dross can be directly treated at leaching plant

• The spent vanadium catalyst can be reused and disposal cost can be saved

• Successful dross leaching signify zero dross to roaster

• High grade cobalt cake serve the purpose of cost generation from waste


• Modification in floatation circuit configuration for increase in metal recoveries

• Plant optimisation through cell hydrodynamic and mineralogical characterization

• Implementation of tailing recovery project

• Process flow sheet validation for cobalt recovery at pilot scale

• Exploration of solvent extraction to get high grade cobalt cake

• Antimony slag treatment plant setup at Chanderiya ancillary plant

• Establishment of vanadium recovery process to bench and pilot scale

• Raw mix design and generation cot high strength bricks & paver blocks

• Zinc dross treatment for magnesium bleeding at pilot scale

• Lab & bench scale testing and parameter optimisation of mercury stripper water

• Recovery of manganese from manganese sulphate solution


During the year, foreign exchange outgo was R 1,700 Crore (which includes import of capital goods, stores & spares, coal, consumables, consultancy, travelling etc.), while foreign exchange earned was R 4,237 Crore.



Particulars Unit Year ended March 31, 2019 Year ended March 31, 2018
Purchase Units Million Kwh 206 191
Total Amount T Cr 172.90 149.33
Average rate of purchasing T/kwh 8.39 7.82
CPP - Units generated from fuel oil
Own Generation Units (From Fuel Oil) Million Kwh 0.28 0.21
Quantity Consumed
LSHS/FO MT 0.42 0.42
HSD KL 493 526
Total Amount T Cr 2.93 4.03
Average cost of fuel per Kg T/kg 72.45 93.28
Average cost of generation T/kwh 102.95 193.97
Unit generated per unit of fuel (LSHS/FO/HSD) kwh/kg 0.70 0.48
CPP - Units generated from Coal
Own Generation Units (From Coal) Million Kwh 3,633 3,693
Quantity Consumed
Coal MT 17,42,116 17,84,862
LDO KL 300 352
Total Amount T Cr 1,456.34 1359.91
Average cost per Kg (Coal) T/kg 8.36 7.62
Average cost per Kg (LDO) T/kg 56.93 57.96
Average cost of generation T/kwh 4.65 4.21
Unit generated per unit of fuel (Coal) kwh/kg 2.27 2.26
(a) L.P.G./Propane
Quantity Million Kg 3.70 5.61
Total Amount T Cr 17.27 23.17
Average cost per Kg T/Kg 46.69 41.27
(b) L.D.O./LSHS/FO
Quantity KL 29,612 19,000
Total Amount T Cr 146.06 66.78
Average cost per Ltr T/Ltr 49.32 35.15
(c) Coal for Steam & Others
Quantity MT 26,250 26,424
Total Amount T Cr 22.61 20.03
Average cost per MT T/MT 8,612 7,580
(d) Met Coke & Coke breez
Quantity MT 99,819 1,34,822
Total Amount T Cr 277.37 353.69
Average cost per MT T/MT 27,787 26,234


As provided under clause 17 (5) (a) of the SEBI (LODR) Regulation 2015, all Board Members and the Senior Management personnel have confirmed compliance with the Business Ethics and Code of Conduct for the year ended on March 31, 2019.

For Hindustan Zinc Limited

Sunil Duggal

CEO & Whole-time Director Camp: London

Date: May 02, 2019

Particulars of contract or arrangements with related parties FORM NO. AOC-2


1. Details of contracts or arrangements or transactions not at arms length basis: NIL

(a) Names(s) of the related party and nature of relationship

(b) Nature of the contracts/arrangements/transactions

(c) Duration of the contracts / arrangements/transactions

(d) Salient terms of the contracts or arrangements or transactions including the value, If any

(e) Justification for entering into such contracts or arrangements or transactions

(f) Date(s) of approval by the board

(g) Amount paid as advances, if any:

(h) Date on which the special resolution was passed in general meeting as required under first proviso to section 188

2. Details of the material contracts or arrangements or transactions at arms length basis: NIL

(a) Names(s) of the related party and nature of relationship

(b) Nature of contracts/arrangements/transactions

(c) Duration of the contracts / arrangements/transactions

(d) Salient terms of the contracts or arrangements or transactions including the value, If any

(e) Date(s) of approval by the board

(f) Amount paid as advances, if any:

For and on behalf of the Board of Directors

Sunil Duggal A.R. Narayanaswamy
CEO & Whole-time Director Director
Camp: London
Place: Mumbai
Date: May 02, 2019

annexure 4


(i) The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year:

Name of Director Mr. Sunil Duggal
Mean 1:51
Median 1:83

(ii) The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year:

Name Annual Increment (%)
Mr. Sunil Duggal 55
Mr. Amitabh Gupta 11
Mr. Swayam Saurabh NA
Mr. R Pandwal (-) 6

(iii) The percentage increase in the median remuneration of employees in the financial year: Mean 11.1%, Median 8.2%

(iv) The number of permanent employees on the rolls of Company: 4,199 (including 24 expats and retainers)

(v) The explanation on the relationship between average increase in remuneration and Company performance: The Company achieved record volumes and profitability in FY 2017-18.

(vi) Comparison of the remuneration of the Key Managerial Personnel against the performance of the Company: Remuneration of the KMPs as % of the PAT for 2018-19 is 0.17%.

(vii) Variation in the market capitalisation of the Company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the Company in comparison to the rate at which the Company came out with the last public offer in case of listed companies and in case of unlisted companies the variations in the net worth of the Company as at the close of the current financial year and previous financial year:

Date Market Price in ( र ) EPS ( र ) P/E ratio Market Capitalization, Crore % Change
March 31, 2018 300.95 21.95 13.71 1,27,161
March 31, 2019 276.40 18.83 14.68 1,16,788 (-) 8.16

Percentage increase over the last public offer price is not relevant as there has never been any public offer by the Company.

(viii) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

- Average increase in the remuneration of all employees excluding KMPs: 10%

- Average increase in the remuneration of KMPs: 31%

- Justification: KMP salary increases are decided based on the Company performance, inflation, prevailing industry trends and benchmarks

(ix) Comparison of remuneration of each of the Key Managerial Personnel against the performance of the Company; Each KMP is granted salary based on his qualification, experience, nature of job, industry benchmark, earlier salary and many other factors, comparison of one against the other is not feasible.

(x) The key parameters for any variable component of remuneration availed by the Directors: Only Whole-time Directors are given variable component, which is benchmarked against Company performance.

Note: The term remuneration includes value of the ESOPs issued by the Holding company.

(xi) The ratio of the remuneration of the highest paid Director to that of the employees who are not Directors but receive remuneration in excess of the highest paid Director during the year: Nil

(xii) Affirmation that the remuneration is as per the remuneration policy of the Company: Yes

Note: For Director, only CEO & Whole-time Director, has been considered. All remuneration figures are for Executives only.

CEO compensation also considers financial returns (return on assets, equity, invested capital), total shareholder return and volume growth of integrated metal