Hindustan Zinc will revisit demerger post parent Vedanta’s split into five: CEO

Mumbai: Hindustan Zinc will focus on its proposed demerger into two or more units once parent company Vedanta Limited completes its ongoing demerger into five separate entities and the Indian Government, which is its largest minority shareholder, firms up its further stake dilution plans, a top executive said.

“We will see if any further OFS will be there or not and then we will start thinking of demerger,” said Arun Misra, the chief executive of the company.

In November, the Indian government raised ₹3,449 crore by selling a 1.6% stake in the company through an offer-for-sale (OFS). Presently, New Delhi holds 27.92% of the company.

“They (the Indian government) were busy on their OFS. We are busy with our Vedanta demerger plan. There will be a time when we re-discuss this (demerger),” Misra said, adding that the plan has not been put on a pause.

“There is no pause. Every good idea has its day. It’s just a matter of time,” he said during a post-earnings interview with Mint.

The government has opposed the company’s proposal to split its operations into separate companies for zinc, lead, silver and recycling, as per news reports.

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Hindustan Zinc shares tumbled 3.95% on the BSE to close at ₹433.4 on a day when benchmark Sensex gained 0.71%. The stock is trading at a price to earnings multiple of 19.5 times against an average of 15.92 times at the end of FY24, as per Bloomberg.

Record Q3 performance

Hindustan Zinc posted a handsome year-on-year growth in its revenue and profit for the third fiscal quarter ending 31 December, buoyed by favourable zinc and silver prices.

The company reported consolidated revenue of ₹8,615 crore for the period, up 18% year-on-year and highest-ever for the third fiscal quarter. This includes other operating income of ₹299 crore. Analysts tracked by Bloomberg had a consensus estimate of a topline of ₹8,335 crore before other operating income.

Profit improved 32% year-on-year to ₹2,678 crore compared to a ₹2,509-crore street estimate.

Earnings before interest, tax, depreciation and amortization (Ebitda) during the December quarter grew 28% to ₹4,499 crore. Ebitda margin improved to 52.2% from 48.2% during the corresponding period last year.

Zinc was trading at an average price of $3,000 per tonne on the LME during the quarter compared to $2,600 a year ago, as per Sandeep Modi, the chief financial officer of Hindustan Zinc. Silver traded at an average of $31 per troy ounce compared to $22 a year ago.

The company also benefitted from the depreciation of the rupee against the US dollar, with every ₹1 dip resulting in additional profit of ₹260 crore for the company, Modi said. The record rally in silver prices also helped the company, with every 10% appreciation translating to an additional profit of ₹550 crore, he said.

Hindustan Zinc was on-course to achieve its best-ever financials for a fiscal year, Modi said.

During the December quarter, the company switched its pyro operations from lead only mode to lead-plus-zinc mode to increase zinc production and benefit from the higher price of the metal. The company also produces silver, which is a by-product of the lead manufacturing process.

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Production in lead-plus-zinc mode results in more zinc production at the expense of silver. The company plans to continue production in this mode during the ongoing quarter.

The company ended the December quarter with a net debt of ₹4,117 crore as against ₹5,721 crore on September 30, 2024. Net borrowings are expected to dip to around ₹2,000 crore by the end of FY25, as per Modi.