Hindustan Zinc to invest Rs 14,000 crore in next 5 years to raise capacity

Hindustan Zinc (HZL), which is the country’s largest miner for zinc metal, plans to invest Rs 14,000 crore (US$ 2 billion) over the next five years, along with the London-based Vedanta group. This investment will be focused to raise annual capacity to 1.5 million tonnes (mt) from the current capacity of 0.8 mt.

According to Sunil Duggal, chief executive officer, "Work is in the planning stage for capacity expansion to 1.35 mt, which will take two to three years. Then, we aim to go to 1.5 mt, which will take another two years."

The company is presently in the final stage of plan to increase capacity from 0.8 mt to 1.2 mt which scheduled to be completed in the March quarter.

Mr Duggal further added, "Our entire expansion will be funded via internal accruals and every phase (to 1.35 mt and then 1.5 mt) will need US$ 1 billion each. We have enough cash reserves and will not borrow."

According to the company's annual report 2018-19, its cash and equivalent was Rs 16,952 crore (US$2.43 billion).

The demand of zinc in the country is 700,000 tonnes annually, with HZL having 80 per cent of the market share. The demand is estimated to grow with the expected rise in opportunities from infrastructure and other segments.  "Domestically sold vehicles do not have galvanised car bodies at present. Due to this, there is big consumption growth potential for zinc in the domestic car segment alone," says Andrew Green, executive director of the International Zinc Association. In India-made cars, zinc content is 15-30 per cent as compared to global average of 80-90 per cent.

"Coastal infrastructure projects normally have not been using galvanised (zinc-coated) steel rebars. However, now for safety purposes and for longer lifecycle of the structure, the government has issued regulations in certain areas to use galvanised steel in these projects. This will bring a lot of renewed demand for zinc in the domestic market," says Duggal.

"The India zinc market demand growth has been four to five per cent (annually), much higher than the two-three per cent seen globally. With new avenues opening in the infrastructure segment, we see domestic (annual) zinc demand growth at 8-10 percent. In such a scenario, we will certainly pitch for the domestic market," he added.

HZL also plans to increase its exposure in high premium value-added products to 50 per cent, from the present 25 per cent.

Mr. Duggal is also interested in venturing into newer minerals and metals, such as gold. He added, "We have 26 mining licences, a majority of which is zinc but including iron ore, copper and even gold. We do have a gold mine licence in Karnataka and Maharastra. We'd like to look at gold actively, but a lot has to be done at present from the government side on these licences."

HZL produces integrated zinc-lead-silver. The mines are located at Rampura Agucha, Sindesar Khurd, Rajpura Dariba, Zawar and Kayad in Rajasthan. An increase of capacity to 1.2 mt will lead to annual silver production of 900-1,000 tonnes. Silver production will have hit 1,400 tonnes as zinc capacity touches 1.5 mt in five years.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.