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Synopsis : Hindustan Zinc plans restructuring for efficiency, awaits government approval for divestment amid declining profits and silver ranking boost.
In September 2023, the company unveiled plans for a corporate overhaul, aiming to establish three distinct divisions focused on zinc and lead, silver, and recycling operations. This strategic initiative underscores our dedication to streamlining operational effectiveness and concentrating on key business areas.
Hindustan Zinc Limited (HZL) CEO Arun Misra announced that the government would disclose an offer-for-sale (OFS) in the next three months. Misra expressed optimism about the OFS proceeding in the current quarter and highlighted the potential loss if the proposed demerger were not pursued due to the favorable metal prices.
An Offer for Sale allows promoters in a listed company to transparently sell their shares directly to the public.
As the largest zinc producer in India, Hindustan Zinc, owned by Vedanta, holds a 64.92% stake, with the government holding 29.54%. Therefore, any restructuring necessitates government approval. However, the government rejected the miner's proposal for split units, citing doubts about enhancing shareholder value, as reported by Reuters last month.
Misra emphasized the readiness of the market for divestment and urged the government to proceed with the process promptly.
The Union Cabinet approved selling the government's entire stake in 2022, with shareholders retaining rights up to 26%. The government plans to divest only 3.5% of its stake in the company.
In the March 2024 quarter (Q4FY24), Hindustan Zinc reported a 21% decline in profit after tax (PAT), attributed to lower zinc prices on the London Metal Exchange (LME). PAT decreased to Rs 2,038 crore from Rs 2,583 crore a year earlier, with net sales declining by 12% to Rs 7,285 crore.
For FY2025, the company plans to invest $270-325 million in capital expenditure, potentially leveraging debt for favorable financing costs. Anticipated project ramp-ups and improved capacity utilization are expected to drive increased production of both mined and refined metals compared to FY24.
On April 18, the company announced its ranking as the third-largest silver producer globally, according to the 2024 World Silver Survey conducted by The Silver Institute in the United States.
