Hindustan Zinc Ltd Directors Report.

Dear Members,

We share with you our 55th Annual Report, together with the Audited Financial Statements for the year ended 31st March, 2021.

The Directors are pleased to inform that Hindustan Zinc delivered exemplary operational performance while ensuring safe operations and continued to improve on its performance of various ESG metrics. We have taken a pro-active approach to keep our assets and people safe while increasing engagement with our communities during these difficult times.

The year in summary

Mine production progressively improved during the year with ore production for the full-year up 7% y-o-y to deliver a record 15.5 Mt, supported by strong production growth at Zawar mines and Rampura Agucha (RA) Mine, which were up 21% and 9% respectively. Operations were halted on account of nationwide lockdown to combat COVID-19 from 22nd March, 2020 and restarted gradually in April 20. Mined metal production was up 6% y-o-y to 972 kt primarily on account of higher ore production with overall grades remaining at same levels.

During the year, back fill plants were commissioned at Zawarmala and Mochia mines. The development of North Decline (ND1) was completed at Rampura Agucha Mine. COVID-19 restrictions including stringent visa guidelines for Chinese nationals continued during the year which resulted in delay in commissioning of Fumer plant at Chanderiya. Feasibility studies are underway at mining locations for expansion to 1.5 Mtpa capacity.

The Company diligently focussed on community upliftment in the areas of Education, Sustainable Livelihoods, Women Empowerment, Health & Water, Sports & Culture, Environment and Community Assets Creation.

I. HEALTH, SAFETY AND ENVIRONMENT Occupational Health & Safety

Health & Safety Performance

LTIFR for the year was 0.97 as compared to 1.38 a year ago. In the reporting year, there has been enhanced leadership focus on incident reporting, categorisation & investigation along with greater focus to bring a cultural change in encouraging reporting via felt leadership programmes, safety town halls, enabling tools like safety whistle-blower as well as reward & recognition for near-miss reporting. During the year, the Company commissioned an underground Occupational Health Centre at Rampura Agucha Mine which significantly improves the response time in emergency cases.

ENVIRONMENT

During the reporting year, waste recycling continued at 31%, and water recycling rate increased marginally to 40% (FY2020: 39%). Specific energy consumption improved marginally to 19.9 GJ/ton of metal (FY2020: 20.4 GJ/ton).

Hindustan Zinc’s 22 MW solar power project at RA mine was registered under Gold Standard during the year. Dariba Smelting Complex (DSC) successfully commissioned a 4500 MTPA FPT (Freeze Precipitation Technology) plant to recover Sodium sulphate from final multi-stage RO rejects which will cater to 1/3rd of DSC Hydro smelter’s input salt requirements to support our circular economy goal. CPP Team conducted an innovative in-house recycling of the bottom ash to convert it into fly ash (saleable product) improving value realization and lowering environment footprint. Hindustan Zinc’s Udaipur Sewage Treatment Plants expanded to 55 MLD translating into over 90% treatment of city’s sewage.

HZL led an endorsement for ‘UNGC (United Nations Global Compact) CEO Water Mandate’ giving our commitment towards water stewardship and initiating our journey to follow the six principles laid out by UNGC. As part of commitment towards biodiversity conservation, the Company is now a member of IUCN ‘Leader for Nature India’ initiative. HZL actively participated in the 3rd meeting of ‘Business Leaders Group COP26’ and actively engaged for shaping the agenda for COP26 which is to be held at Glasgow (UK) in Nov’21.

Our sustainability activities received several endorsements during the year including selection in ‘Sustainability Yearbook 2021’ as Member for 4th consecutive year, 1 st position in Asia Pacific region in metal and mining sector in Dow Jones Sustainability Indices and 7th Globally and CII-ITC Corporate Excellence Sustainability Award 2020. Hindustan Zinc was featured among the first Indian companies to be featured in CDP India Annual Report and was rated ‘A’ in Climate change CDP 2020.

Hindustan Zinc Limited is the first investor requested company in India to respond to CDP’s Forests questionnaire and also received Supplier Engagement Rating ‘A’ from CDP.

II. OPERATIONAL PERFORMANCE Production performance

Production (kt) FY2021 FY2020 % change
Total mined metal 972 917 6%
Refinery metal production 930 870 7%
Refined zinc – integrated 716 688 4%
Refined lead – integrated1 214 182 18%
Production – silver (in tons)2 706 610 16%

1. Ex cluding captive consumption ,424 tons in FY2021 vs. 7 of 6 ,088 tons in FY2020.

2. Excluding captive consumption of 34.6 tons in FY2021 vs. 36.7 tons in FY2020.

Production

For the full-year, ore production was up 7% y-o-y to 15.5 Mt on account of strong production growth at Rampura Agucha Mine and Zawar mines, which were up 9% and 21% respectively. Mined metal production for FY2021 was 971,976 tons compared to 917,101 tons in the prior year in line with higher ore production.

For the full year, integrated metal production was up 7% to 930 kt in line with higher MIC availability, while silver production was up by 16% to a record 706 tons in line with higher lead production and slightly better grades at SK. These record numbers were delivered despite losing 3-4 weeks equivalent of production days in the year due to COVID related lockdown and other disruptions resulting from rising infections.

The Company generated 4,085 million units of thermal based power in FY2021 as compared to 3,880 million units in FY2020. Total green power generation was 649 million units as compared to 609 million units in FY2020.

Sales

The refined zinc metal sales in the domestic market during the year was 437kt, while export sales accounted for 287kt as compared to 486kt and 194kt respectively a year ago. The aggregate sales were higher by 6% than previous year, in line with production. Lead metal sales in the domestic market were 181kt, while export sales were 35kt leading to higher aggregate sales of 20% from a year ago, in line with the increase in lead metal production during the year. Silver sales were 735 tons in FY2021, all in the domestic market and 25% higher than previous year.

III. FINANCIAL PERFORMANCE Financial Information

( Rs. in crore)

Particulars FY2021 FY2020
Revenue from operations 22,629 18,561
Other Income 1,819 1,934
Profit before depreciation, interest and tax 13,491 10,781
Less: Interest 386 112
Less: Depreciation and amortisation expense 2,531 2,279
Profit before tax 10,574 8,390
Less: Net tax expense 2,594 1,585
Net profit 7,980 6,805
Earnings per share, Rs. 18.89 16.11

Revenue

The Company reported ‘Revenue from operations’ including other operating income of Rs. 22,629 crore, an increase of 22% y-o-y primarily on account of increase in metal sales and higher silver prices.

The ‘Other income’ was Rs. 1,819 crore during the year compared to Rs. 1,934 crore in the previous year on account of lower treasury income due to lower rate of return on fresh investments/ reinvestments during the year on account of lower interest rates.

Production Cost

Zinc’s cost of production (COP), excluding royalty for FY2021 was Rs. 70,681 (US$954) per ton, lower by 5% y-o-y (9% in US$). The full year COP decrease reflects higher production volume, lower power costs, lower metcoke and cement costs partly offset by higher admin expense (Covid donation), lower sulphuric acid credits and higher diesel costs.

Operating margin

The above revenue and production cost resulted in profit before depreciation, interest and tax (PBDIT) of Rs. 13,491 crore in FY2021, up 25% on account of higher revenue and lower cost of production.

Net profit

Net profit was Rs. 7,980 crore, up 17% on account of higher PBDIT partly offset by higher D&A expense and higher effective tax rate. Tax rate for the year was 24.5% as compared to 18.9% due to reversal of deferred tax liabilities in FY2020 related to prior years pursuant to Company’s expectation of moving to a lower tax regime under Section 115BBA of the Income Tax Act, 1961.

Earnings Per Share (EPS)

The EPS for the year was Rs. 18.89 per share as compared to Rs. 16.11 per share in FY2020.

Dividend

Interim dividend of 1065%, i.e. Rs. 21.3 per share on equity share of Rs. 2 each amounting to Rs. 9,000 crore was declared in October 2020.

The Dividend Distribution Policy, in terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations") is available on the Company’s website on https:// www.hzlindia.com/wp-content/uploads/ Dividend-Policy-2016.pdf

Credit Rating and Liquidity

CRISIL has reafirmed the Company’s long-term rating of AAA/Stable and short-term rating of A1+. The ratings continue to reflect the Company’s low cost operations, strong market position, efficient and integrated operations, high reserve & resource and a strong balance sheet.

The Company follows a conservative investment policy and invests in high quality debt instruments. As on 31st March, 2021, the Company’s net cash and cash equivalents was Rs. 15,130 crore as compared to Rs. 21,596 crore at the end of FY2020 and is invested in high quality debt instruments.

Cash Flows

( Rs. in crore)

Particulars FY2021 FY2020
Opening Cash* 22,207 19,490
Add: EBITDA** 11,739 8,849
Add: Net Interest Income 1,258 1,722
Less: Income Tax 1,755 1, 135
Less: Dividend 15,972 0
Less: Capital Account Payments 2,481 3,637
Add: Borrowings 6,525 -1924
(Increase)/Decrease in Working Capital & Others 787 -1, 158
Closing Cash* 22,308 22,207

(*) Includes Cash & Equivalents (refer Note 11 of the Audited Financial Statements), other bank balances excluding earmarked unpaid dividend accounts balance (refer note 12 of the Audited Financial Statements) and Current Investments (refer Note 9 of the Audited Financial Statements).

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

Gross Working Capital

Gross working capital represented by inventory, trade receivables and other current assets decreased from Rs. 2,558 crore to Rs. 2,180 crore as at 31st March, 2021 primarily due to decrease of stores & finished goods inventory. The working capital cycle was 36 days in FY2021 as compared to 51 days in FY2020.

Gross Block

The gross block during the year increased from Rs. 32,106 crore to Rs. 34,228 crore. This was largely due to the ongoing mining projects and other sustaining capex.

Capital Employed

The total capital employed as at 31st March, 2021 was Rs. 17,183, crore, as compared to Rs. 18,714 crore at the end of previous fiscal year mainly due to payment of dividend in current fiscal year.

Contribution to the Government Treasury

The Company has contributed Rs. 15,008 crore during FY2021, in terms of royalties and taxes to the Government treasury, aggregating to approximately 66% of the total revenue.

IV. RESERVE & RESOURCE (R&R)

On an exclusive basis, total ore reserves at the end of FY2021 totalled 150.3 Mt and mineral resources totalled 297.6 Mt. Total contained metal in Ore Reserves is 9.16 Mt of zinc, 2.55 Mt of lead and 295.5 million ounces of silver. The Mineral Resource contains 14.9 Mt of zinc, 6.3 Mt of lead and 618.7 million ounces of silver. At current mining rates, the R&R underpins metal production for more than 25 years. This year Company replenished 2.7 times more resource than it consumed during the year i.e. there is a gross resource addition of 61.9Mt with a contained metal of 3.1 Mt, which is highest resource addition in last decade.

V. PROJECTS

We commissioned a 10 MLD STP plant in Udaipur and another 5 MLD STP is in its last leg of commissioning, which will take the total STP capacity set up by us to 60 MLD. This will treat almost the entire sewage of Udaipur city and the recycled water will be used by our plants, significantly reducing our fresh water intake.

During the year, Graphite floatation system was commissioned at Mill 3 of Sindesar Khurd Mines, which will enhance the smelter throughput and boost the recovery.

During the year, back fill plants were commissioned at Zawarmala and Mochia mines. These plants will de-risk operations and provide opportunity to mine left-out high-grade ore in pillars. On similar lines, we have also started execution activities for combined paste-fill and dry tailing plant at Rajpura Dariba which will help in increasing ore production from 1.2 Mtpa to 2 Mtpa. This will also facilitate in additional utilization of tails by ~20% for back-filling and will reduce stope turnaround time.

The development of North Decline (ND1) was completed at Rampura Agucha Mine (RAM). This improves the accessibility of shaft section, alternate emergency evacuation, ease in mine equipment deployment at lower levels of mine, face charging with emulsion explosives, face drilling with long feed jumbo, etc.

We have started operations in RKD circuit (component of overall Fumer project) to treat Raw Zinc Oxide (RZO). COVID-19 restrictions including stringent visa guidelines for Chinese nationals continued during the year which resulted in delay in commissioning of Fumer plant at Chanderiya. We are following up with authorities to find a solution.

VI. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company’s CSR passionately focuses on community upliftment through Education, Sustainable Livelihoods, Women Empowerment, Health & Water, Sports & Culture, Environment and Community Assets Creation.

During the year, the Company spent Rs. 214 crore on CSR programmes as compared to Rs. 132 crore in previous year. For further details, refer Annexure 3 and ‘Business Review’ section of this Annual Report.

VII. DIRECTORS

During the year under review, following changes took place in the Board of Directors:

Pursuant to expiry of the appointed tenure of Mr. Sunil Duggal as CEO & WTD on 31st July, 2020, Mr. Arun Misra was appointed as CEO & WTD of the company w.e.f 1st August, 2020.

Similarly, Mr. Akhilesh Joshi and Mr. Anjani Kumar Agrawal were appointed as Independent Directors w.e.f 1st August, 2020 upon the expiry of the appointed tenure of Mr. A R Narayanaswamy and Mr. Arun L Todarwal on 31st July, 2020.

Government of India, Ministry of Mines appointed Ms. Yatinder Prasad on the Board w.e.f 7th August, 2020 , in place of Mrs. Reena Sinha Puri.

The company’s policy on appointment of Directors and their remuneration is available on the Company’s website https://www.hzlindia. com/wp-content/uploads/HZL-Nomination-Remuneration-Policy-20.1.2020.pdf

VIII. MANAGEMENT DISCUSSION AND ANALYSIS

The ‘Our Operational Performance’ section of this Annual Report gives a detailed account of the Company’s operations and the market in which it operates, including its initiatives in areas of human resources, sustainability and risk management.

IX. CORPORATE GOVERNANCE AND BUSINESS RESPONSIBILITY REPORT

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 the Company from an Environmental, Social and Governance perspective, also forms a part of this report. In order to maintain transparency and efficient governance, various disclosures as required under Sections 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, etc.

X. DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 134(5) of the Companies Act, 2013 , the Board of Directors, to the best of their knowledge and ability confirm that:

i. In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

ii. they have selected such accounting policies and 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. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv. the annual accounts have been prepared on a ‘Going Concern’ basis.

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

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

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, the work performed by the internal, statutory and secretarial auditors and external consultants, including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by management and the relevant board committees, including the audit committee, the Board is of the opinion that the Company’s internal financial controls were adequate and effective during FY2021.

XI. BOARD EVALUATION

The Board of Directors has carried out an annual evaluation of its own performance, board committees, and individual directors pursuant to the provisions of the Act and SEBI Listing Regulations.

The performance of the board was evaluated by the Board after seeking inputs from all the directors on the basis of criteria such as the board composition and structure, effectiveness of board processes, information and functioning, etc.

The performance of the committees was evaluated by the Board after seeking inputs from the committee members on the basis of criteria such as the composition of committees, effectiveness of committee meetings, etc.

The above criteria are broadly based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on 5th January, 2017.

In a separate meeting of independent directors, performance of non-independent directors, the Board as a whole and Chairman of the Company was evaluated, taking into account the views of executive directors and non-executive directors.

The Board and the Nomination and Remuneration Committee reviewed the performance of individual directors on the basis of criteria such as the contribution of the individual director to the board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc.

At the board meeting that followed the meeting of the independent directors and meeting of Nomination and Remuneration Committee, the performance of the Board, its Committees, and individual directors was also discussed. Performance evaluation of independent directors was done by the Board members, excluding the independent director who is being evaluated.

XII. INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The details in respect of internal financial control and their adequacy are included in the Management Discussion and Analysis, which is a part of this report.

XIII. AUDITORS

The Company had appointed M/s. S. R. Batliboi & Co. LLP, Chartered Accountants, as Statutory Auditors of the Company to conduct audit of Financial Statements for the year ended 31st March, 2021. 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 in CG certificate is for not fulfilling the criteria of adequate number of Independent Directors including woman independent director and for which we are in touch with the two major shareholders, and purchase of Bonds from holding company which is self-explanatory.

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. Their report does not contain any qualification or reservation. The only adverse remark is for not fulfilling the criteria of adequate number of Independent Directors including woman independent director, for which we are in touch with the two major shareholders and other procedural delays due to COVID-19, which are self-explanatory.

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 whose e-mail addresses are registered.

XIV. VIGIL MECHANISM

The Company has a Whistle Blower Policy and has established the necessary vigil mechanism for directors and employees in confirmation with Section 177(9) of the Act and Regulation 22 of Listing Regulations, to report concerns about unethical behaviour. This Policy is available on the Company’s website on https:// www.hzlindia.com/wp-content/uploads/HZL-WHISTLE-BLOWER-POLICY-19.10.2015.pdf

XV. ANNUAL RETURN

Pursuant to Section 92(3) read with Section 134(3)(a) of the Act, the Annual Return as on 31st March, 2021 is available on the Company’s website on https://www.hzlindia.com/investors/ reports-press-releases/

XVI. PARTICULARS OF EMPLOYEES

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 Company’s website: www.hzlindia.com.

In line with the internal guidelines of the Company, no payment is made towards commission to the Executive Director of the Company, who is in full time employment with the Company.

XVII.INTEGRATED REPORT

The Company being one of the top companies in the country in terms of market capitalization, has voluntarily provided Integrated Report, which encompasses both financial and non-financial information to enable the Members to take well informed decisions and have a better understanding of the Company’s long-term perspective. The Report also touches upon aspects such as organisation’s strategy, governance framework, performance and prospects of value creation based on the six forms of capital viz. financial capital, manufactured capital, intellectual capital , human capital, social and relationship capital and natural capital.

XVIII.ACKNOWLEDGEMENTS

We sincerely thank our customers, vendors, investors, business partners , worker unions, auditors and bankers for their continued support during the year. We place on record our appreciation of the contribution made by employees at all levels. Our continued success was made possible by their hard work, solidarity, commitment and support. We thank the Government of India, the State Governments of Rajasthan, Andhra Pradesh, Gujarat, Karnataka , Tamil Nadu, Maharashtra and Uttarakhand for their continued support.

For and on behalf of the Board of Directors
Arun Misra Anjani K Agrawal
CEO & Whole-time Director Director
Place: Udaipur Mumbai
Date: 27th April , 2021