In 4-6 weeks, Hindustan Zinc will present a demerger proposal to the board

23 Oct 2023 , 12:33 PM

Once the consultants’ final recommendations are received, Hindustan Zinc Ltd.’s CEO Arun Misra said the company will present its demerger proposal to the board in four to six weeks.

Late last month, the board of Hindustan Zinc instructed the corporation to investigate a corporate restructure that would separate the lead and zinc, silver, and recycling businesses into three distinct organizations.

‘The modalities of forming these companies, including the distribution of cash and debt, will be based on recommendations of our consultants,’ Misra said in a conversation with ET. He withheld the name of the business that had been chosen for the job.

In an effort to maximize value for shareholders, Hindustan Zinc and its parent company Vedanta Ltd., which is listed on the Indian stock exchange, have both announced the division of their companies into six sectors.

In an interview with ET, Misra stated that Hindustan Zinc’s market capitalization of $16 billion was ‘not commensurate with the structural strength, the organizational strength, the ESG commitments that the company has displayed, and its product portfolio.’

With an annual production capacity of 800 tonnes of silver, the company produces silver in addition to its primary businesses of producing zinc and lead. In the current fiscal year, the business forecasts producing 725–750 tonnes of silver.

‘Silver accounts for between 30 and 40 percent of the company’s EBITDA, yet it is never thought of as a silver producer. As Misra explained the justification for the demerger, ‘We also have enormous amounts of residue, and there are technologies now which can get metal out of them.

The company, which lowered its expenses with the help of decreased coal prices and cost optimization, reported a steep decline in profit for the July-September quarter on Friday due to muted zinc prices.

The Vedanta Group company reported a consolidated profit for the quarter of Rs 1,729 crore, down 36% from the same period last year and 12% from the previous quarter. The combined topline, however, fell by 19% year over year to Rs 6,619 crore.

According to the company, it was able to reduce its cost of producing zinc by 6.3% on an annual basis to Rs 93,981 per tonne during the quarter. According to the corporation, this was the lowest cost in the previous six quarters and the third straight quarter of cost improvement.

Over the course of the current fiscal year, there is potential for a further cost reduction of Rs 2,000–2,500 per tonne, according to Misra.

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