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Hindustan Zinc Ltd.

BSE: 500188 Sector: Metals & Mining
NSE: HINDZINC ISIN Code: INE267A01025
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OPEN 327.00
PREVIOUS CLOSE 326.75
VOLUME 59300
52-Week high 333.40
52-Week low 226.75
P/E 14.93
Mkt Cap.(Rs cr) 136,667
Buy Price 323.45
Buy Qty 223.00
Sell Price 323.75
Sell Qty 275.00
OPEN 327.00
CLOSE 326.75
VOLUME 59300
52-Week high 333.40
52-Week low 226.75
P/E 14.93
Mkt Cap.(Rs cr) 136,667
Buy Price 323.45
Buy Qty 223.00
Sell Price 323.75
Sell Qty 275.00

Hindustan Zinc Ltd. (HINDZINC) - Director Report

Company director report

Dear Members

The Directors are pleased to inform that Hindustan Zinc achieved new operationalperformance benchmarks highest ever profits and declared the highest ever dividend duringthe year.

I. FINANCIAL PERFORMANCE

We share with you our 51st Annual Report together with the statement of AuditedFinancial Statements for the year ended March 31 2017. The Company's performance groupedin accordance with the new accounting standards Ind-AS is summarized below:

Financial Information (` in Crore)
FY 2017 FY 2016
Total Gross Revenues (excluding Other Income) 18798 15463
Profit before depreciation interest and tax 12213 9385
Less: Interest 202 17
Less: Depreciation and amortization expense 1811 745
Profit before tax 10200 8623
Net tax expense/(benefit) -1884 -448
Profit for the year 8316 8175
Earnings per equity share ` 19.68 19.35

Total Revenue Including Other Income

The Company reported total gross revenue excluding other income of ` 18798 Crore anincrease of 21.6% compared to FY 2016. The increase was primarily on account of strongzinc lead & silver prices and higher production partly offset by lower zinc volumesdue to lower mined metal availability in first half.

The ‘Other income' was ` 2474 Crore during the year down 9.3% as compared to theprevious year on account of smaller investment corpus subsequent to Golden Jubileedividend payout during the year partly offset by higher rate of return.

Production Cost

Net zinc metal cost without royalty during the year was higher by 5.8% in INR and3.2% in USD terms at ` 55679 ($ 830) compared with the previous year. The increase wason account of lower integrated production higher coal & input commodity prices loweraverage grades due to change in mining mix and lower by-product credit.

Operating margin

The above revenue and production cost resulted in profit before depreciation interestand tax (PBDIT) of ` 12213 Crore in FY 2017 up 30.7%.

Net Profit

The Company reported record net profit of

` 8316 Crore for the year marginally higher than previous year. The impact of higherPBDIT was partly offset by higher tax higher depreciation and lower other income duringthe year.

Earnings Per Share (EPS)

The EPS for the year was ` 19.68 per share as compared to ` 19.35 per share infinancial year 2015-16.

Dividend

On March 22 2017 the Board of Directors declared a Special Interim dividend of 1375%i.e. ` 27.50 per share on every share of ` 2 each. This dividend entails an outflow of

` 13985 Crore including dividend distribution tax (DDT). The Special dividend was inaddition to the first interim dividend paid (` 1.90 per share or 95%) in October 2016 of `966 Crore including DDT. The total dividend outflow including DDT for FY 2017 was `14951 Crore (` 29.40 per share of

` 2 or 1470%) against FY 2016 dividend of

` 14137 Crore (` 27.80 per share or

1390%). In view of the Special dividend paid in March 2017 no final dividend wasrecommended.

Credit Rating and Liquidity

CRISIL has reaffirmed the Company's long-term rating of AAA/Stable and short-termrating of A1+. The Company's strong financial risk profile is driven by its sustainedstrong liquidity and conservative capital structure as well as its integrated operationshighly competitive cost position and high-grade reserves.

The Company follows a conservative investment policy and invests in high quality debtinstruments. As on March 31 2017 net cash and cash equivalents were ` 16065 Crorewhich excludes ` 7908 Crore of short term commercial paper raised to meet the specialinterim dividend fund requirement to avoid tax inefficiencies. The gross investments were` 23972 Crore in high quality debt instruments including ` 19336 Crore in mutual fundsand ` 4446 Crore in bonds.

Cash Flows

Particulars FY 2017 FY 2016
Opening Cash* 35272 30898
Add: EBITDA** 9734 6667
Add: Net Interest Income 2166 2699
Less: Income Tax & Dividend -21310 -5025
Less: Capital Account Payments -2008 -1550
(Increase) / Decrease in Working Capital & Others 118 1583
Closing Cash Balance 23972 35272

(*) Includes Cash & Equivalents (refer Note 11 of the Audited Financial Statements)and Current Investments (refer Note 9 of the Audited Financial Statements)

(**) Earnings before Interest Tax Depreciation and Amortization expenses and Incomeon investments

Gross Working Capital

Gross working capital represented by inventory sundry debtors and loans & advancesincreased from ` 1639 Crore to

` 2486 Crore as at March 31 2017 primarily due to accretion of ore and mined-metalinventory. The working capital cycle was 52 days in FY 2017 as compared to 40 days in FY2016 calculated based on new Ind AS guidelines.

Gross Block

The gross block during the year increased from ` 18952 Crore to ` 20975 Crore. Thiswas largely due to the on-going mining projects and other sustaining capex.

Capital Employed

The total capital employed as at March 31 2017 was ` 14740 Crore as compared to

` 2114 Crore at the end of previous scal year. The increase is mainly due to higherdividend liability last year and lower surplus cash this year

Contribution to the Exchequer

Your Company has contributed ` 11095 Crore during FY 2017 in terms of royaltiestaxes and duties to the exchequer on cash basis.

II. OPERATIONAL PERFORMANCE

Production

Mined metal production was 906984 MT up 2% from a year ago and the highest ever. Theunderground mines ramped up signi cantly during the year to achieve a substantial 44%y-o-y increase in ore production and 32% y-o-y increase in mined metal production.

Integrated re ned zinc and saleable lead production this year were a record 670078 MTand 139009 MT down 12% and 1% respectively. The total re ned zinc was 671988 MT down11% from a year ago while total saleable lead production was 139009 MT which is lowerby 4% compared to FY 2016. The decrease was on account of low availability of mined metalin rst half due to the cyclical pattern of the Rampura Agucha open cast mine and as perplan.

During the year production of integrated saleable silver increased by 7% to anall-time high of 453 MT on account of higher volume and grades from Sindesar Khurd mine.

Our total power generation in FY 2017 was 3345 million units down 3.5% from lastyear. Our wind power generation was up 8% at 448 million units.

We delivered highest ever mined metal production in FY 2017

Sales

The re ned zinc metal sales in the domestic market during the year was 472824 MT

(inclusive of imported Zinc metal of 24072 MT) while export sales accounted for223176 MT. The aggregate sales were lower by 8.5% than previous year. Lead metal salesin the domestic market were 117313 MT while export sales were 20940 MT lower by 4.9%compared to previous year. This reduction was due to lower cyclical mine production in rsthalf of the year resulting in lower metal volumes.

Silver sales were 449 MT in FY 2017 all in the domestic market and 5.4% higher thanprevious year.

III. RESERVE & RESOURCE (R&R)

Our exploration activity has consistently added to our reserve and resource base overthe last several years. We have added 26.40 million MT to our R&R this year prior toa depletion of 11.90 million MT during the period. Total R&R on March 31 2017 were404.40 million MT containing 36.09 million MT of zinc-lead metal and approximately 32 kTof silver.

Our active exploration has led to over 25+ years of mine life

IV. PROJECTS

The Company remains on track for achieving 1.2 mtpa mined metal capacity by FY 2020.

The transition to underground mining is progressing well as share of underground minedmetal production increased from 40% in FY 2016 to 52% in FY 2017. Our ore production fromunderground mines increased by 44% compared to last year. Further total mine developmentreached 66545 meters during the year which is higher by 15% from a year ago.

During the year Rampura Agucha underground mine produced 1.4 million MT of ore ascompared with 0.2 million MT a year ago. The south ventilation shaft sinking was completedtowards the end of the year while the main shaft sinking reached its ultimate depth of955 metres. Further cold commissioning of both production & service winders wascompleted during the quarter as shaft equipping work continues to progress satisfactorily.

Sindesar Khurd mine achieved record ore production of 3.7 million MT of ore in thisyear against 2.97 million MT in the previous year. The winder foundation work for theshaft was completed while head gear erection is nearing completion. The new mill of 1.5mtpa capacity was completed in record 14 months and is running smoothly. We plan to reachour targeted capacity of 4.5 million MT this year ahead of schedule.

Zawar mine achieved record ore production of 1.8 million MT during the year.Environmental clearance of 4 mtpa ore production & bene ciation along with otherstatutory permissions were received towards the end of the year. Zawar mill expansion andassociated power up-gradation project are at advanced stages with completion planned in Q2of FY

2018.

The recent fumer project which has been undertaken to further improve pro tability andmetal recoveries from the Company's hydro metallurgical plant is progressing withscheduled completion by mid FY 2019.

The Company successfully commissioned 16 MW of captive solar farms in March 2017. Thisproject will help the Company partly meet its renewable power obligation and has been setup on waste lands.

V. OUTLOOK

Projects: The Company's transition to underground mining is progressing well and weexpect the share of mined metal to increase from 52% in FY 2017 to 80% in FY

2018. Both Rampura Agucha and Sindesar Khurd shafts are on track for completion in FY2019. The capex on the on-going mine expansion projects fumer and smelterde-bottlenecking will be around $350-360 million in FY 2018.

Operations: In FY 2018 mined metal production is expected to be higher than FY

2017. Re ned zinc-lead metal production will be around 950 kt which will be evenlyspread through the year. Silver production will be over 500 MT.

Financial: Dollar COP (excluding royalty) is expected to be marginally higher based oncurrent levels of coal & input commodity prices. Treasury income is expected to belower due to reduction in investment corpus and current softening in rates while tax ratefor FY 2018 is expected to be slightly higher than MAT.

VI. HEALTH SAFETY AND

ENVIRONMENT (HSE)

The Company's efforts towards reinforcing a positive safety culture have resulted inreduction of total Lost Time Injuries from 23 last year to 15 this year while the LostTime

Injury Frequency Rate reduced to 0.30 from 0.50 a year ago. However the Company isdeeply anguished to report an unfortunate accident at the project site post millcommissioning where a rare crane collapse caused four fatalities of contractor employees.The accident was fully investigated and corrective action was taken at all our sites.

HSE initiatives have been discussed in detail from page 45 to 51 in ‘BusinessReview' which forms a part of this Annual Report.

VII. CORPORATE SOCIAL

RESPONSIBILITY (CSR)

Company's CSR policy focuses on Education Sustainable Livelihoods Women'sEmpowerment Health Water & Sanitation Sports & Culture Environment andCommunity Development. Detailed policy is available on our websitehttp://hzlindia.com/social_policy.aspx

During the year we spent ` 49.40 Crore on our CSR programs and also contributed

` 50 Crore to Vedanta Foundation for setting-up Nandghars under our Bal Aanganwadiprogram. In addition the Company has also provided ` 543 Crore as contribution toDistrict Mineral Foundation which will be utilized for the interest and bene t of thepersons and areas affected by mining related operations which is also quasi CSR. Detailsof the same are provided in Annexure 5.

For details on existing CSR projects please refer to page 52 to 57 of ‘BusinessReview' which forms a part of this Annual Report.

VIII. DIRECTORS

During the year under review following changes took place in the Board of Directors ofyour Company. Ms. Reena Sinha Puri Ms. Farida M Naik and Mr. Nikunja Bihari Dhal wereappointed as Directors on the Board while Mr. Akhilesh Joshi Ms. Sujata Prasad Mr.Sudhaker Shukla and Mr. Nikunja Bihari Dhal ceased to be directors during the year.

IX. MANAGEMENT DISCUSSION

AND ANALYSIS

The Business Review section of this Annual Report gives a detailed account of yourCompany's operations and the market in which it operates including its initiatives inareas such as human resources sustainability and risk management.

X. CORPORATE GOVERNANCE

AND BUSINESS

RESPONSIBILITY REPORT

As a listed company necessary measures are taken to comply with the listing agreementsof the Stock exchanges. A report on Corporate Governance along with a certi cate ofcompliance from the statutory auditors forms part of this report. Further BusinessResponsibility Report describing the initiatives taken by your Company from anEnvironmental Social and Governance perspective also forms a part of this report.Various disclosures as required under section 134 and 135 of the Companies Act 2013 areannexed to this report or covered in the Corporate Governance Report such as RelatedParty Transactions; Information and details on conservation of energy technologyabsorption foreign exchange earnings and outgo; extract of annual return; constitution ofvarious Board level committees; Annual Report on CSR.

XI. DIRECTORS RESPONSIBILITY

STATEMENT

As required under Section 134(5) of the Companies Act 2013 the Directors hereby conrm that:

i In the preparation of the annual accounts the applicable accounting standards readwith requirements set out under Schedule 3 to the act have been followed and there are nomaterial departures in the same.

ii. The Directors have selected such accounting policies applied them consistently andmade judgements & estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the nancial year and of thepro ts of the Company for that period.

iii. The Directors have taken proper and suf cient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.

iv. The Directors have prepared the annual accounts on a ‘Going Concern' basis.

v. The Directors have laid down internal nancial controls to be followed by the Companyand that such internal nancial controls are adequate and were operating effectively and

vi. The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively

XII. AUDITORS

The Company had appointed M/s. SR

Batliboi & Co. LLP Chartered Accountants as Statutory Auditors of the Company toconduct audit of Financial Statements for the year ended March 31 2017. The Notes tonancial statement referred to in the Auditors' Report are self-explanatory and do not callfor any further comments. The Auditors' Report does not contain any quali cation orreservation. The only adverse remark is for not ful lling the criteria of adequate numberof Independent Directors which is expected to be complied soon and not having a WomanDirector for part of the year.

Pursuant to the orders issued by the Central Government under section 148 of TheCompanies Act 2013 the Board has appointed M/s K G Goyal & Co. Cost Accountants forconducting the audit of the cost accounting records maintained by the Company for all itsproducts and M/s V M & Associates Company Secretaries as the Secretarial Auditors forconducting the Secretarial audit of the Company.

As per provisions of Section 136 of the Companies Act 2013 the Annual Reportincluding the Audited Accounts for the year will be sent to all the Shareholders.

XIII. PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial 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 showingthe names and other particulars of employees drawing remuneration in excess of the limitsset out in the said Rules forms part of the Report.However having regard to theprovisions of the rst proviso to Section 136(1) of the Companies Act 2013 the AnnualReport excluding the aforesaid information is being sent to the Members of the Company.The said information is available for inspection at Registered Of ce of the Company duringworking hours. Any member interested in obtaining such information may write to theCompany Secretary at the registered of ce and the same will be furnished on request.Further the details are also available on the Company's website: www.hzlindia.com.

XIV. ACKNOWLEDGEMENTS

The Board of Directors places on record its sincere appreciation of the contributionmade by the employees and the employees' unions in the success of the Company. TheDirectors also sincerely thank the Central Government and the State Governments ofRajasthan Andhra Pradesh Gujarat Karnataka Tamil Nadu Maharashtra Jharkhand andUttarakhand; and the bankers auditors vendors customers and the shareholders of theCompany for their continued support.

For and on behalf of the Board of Directors

Sunil Duggal A R Narayanaswamy
CEO & Whole-time Director Director
Place: Mumbai
Date: April 20 2017

ANNEXURE 1

Particulars of technology absorption and foreign exchange earnings and outgo as perSection 134(3)(m) of the Companies Act 2013 and the rules made therein and forming partof the Directors' Report for the year ended March 31 2017.

A) Conservation of Energy

1. Dariba CPP is the rst and only running power plant in Rajasthan to run completely onSewage Treated water.

2. 16 MW solar power plants have been installed in our premises utilizing tailing damand secured land ll land which was otherwise wasted.

3. Dariba CPP is utilizing excess steam generated in lead plant process for powergeneration purpose thus saving water heat energy and power. This project was recognizedwith certi cate of merit under Process Innovation category by Frost and Sullivan.

4. All the ducts in power plants have been analyzed through computational uid dynamicssoftware and modi cations have been carried out to reduce pressure drop and save energy.

5. Continuous re-utilization of bottom ash water in all CPPs to save fresh waterthrough in-house modi cation and utilizing the coal settling pond.

B) Technology Absorption

a. Speci c areas in which R&D has been carried out by the Company in FY 2017

1. Pilot plant was commissioned for the treatment of slag generated at Pantnagar MetalPlant to recover copper sulphate suitable for consumption in mines.

2. To reduce manganese levels in cell house manganese reduction campaign was commencedin Dariba.

3. Use of Zinc Cadmium alloy dust as partial replacement of SHG zinc dust wassuccessfully implemented at Chanderiya.

4. Fly-ash as partial replacement of cement in paste ll plants has been explored andresults were found encouraging.

5. Plant scale trials for Rampura Agucha tails otation were conducted and 100 MT bulkconcentrate of total metal content 40% was produced. Further trials for 1000 MT batch areplanned.

6. Experiments were done to consume different variety of cements and additives inshotcrete process in mining and successfully implemented.

7. A process route for recovering sodium sulphate crystals from RO reject streams wasexplored in lab scale with > 98% crystal purity and >40% recovery. An alternativeroute for higher crystal recovery is being explored.

8. Testing of PW zinc dust instead of HG zinc was done. No adverse impact of impuritieswas found on the puri cation system.

9. An alternative route for rejection of iron from hydrometallurgical streams has beenexplored and a detailed owsheet has been tested in lab scale which resulted in anappreciable grade of 40-45% iron in goethite residue. Further testing of owsheet is underprogress.

10. Circuit survey and process improvement studies to improve recoveries from beneciation plant at Zawar mines were carried during the year.

b. Bene ts derived as result of above R&D

1. Focusing on wealth out of waste processes developed for recovery of silverantimony copper and bismuth from secondaries.

2. Enabling in-house production of reagents like copper sulphate and sodium sulfateused in smelters

3. Established alternate cost effective graphite depressant and reagents to reducecommodities reagent consumption.

4. Stepping towards zero waste zinc hydrometallurgical smelting by generating valueadded products from Jarosite.

5. Process improvement of grinding circuit through modeling and simulation.

c. Future Projects for R&D in FY 2018

1. Validation of Copper Bismuth slag leaching owsheet.

2. Usages of waste materials in road paver blocks.

3. Process for recovery of Nickle & Cobalt from puri cation cake.

4. Finding alternative reagents for silver otation and graphite pyrite depressant.

C) Foreign Exchange Earnings and Outgo

During the year foreign exchange outgo was

` 1586 Crore (which includes import of capital goods stores & spares coalconsumables consultancy travelling etc.) while foreign exchange earned was

` 4173 Crore.

FORM A_

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

Particulars Unit Year ended March 31 2017 Year ended March 31 2016
A Electricity Power Generation & Fuel consumption
Purchase Units Million Kwh 264 261
Total Amount ` Cr 210.48 139.31
Average rate of purchasing `/kwh 7.98 5.34
CPP - Units generated from fuel oil
Own Generation Units (from Fuel Oil) Million Kwh 1 3
Quantity Consumed
LSHS/FO MT 0 274
HSD KL 453 797
Total Amount ` Cr 2.33 5.07
Average cost of fuel per Kg `/kg 60.01 54.64
Average cost of generation `/kwh 22.5 16.43
Unit generated per unit of fuel (LSHS/FO/HSD) kwh/kg 2.79 3.32
CPP - Units generated from Coal
Own Generation Units (from Coal) Million Kwh 3241 3348
Quantity Consumed
Coal MT 1587724 1632488
LDO KL 240 397
Total Amount ` Cr 1026.26 965.98
Average cost per Kg (Coal) `/kg 6.46 5.92
Average cost per Kg (LDO) `/kg 54.45 58.54
Average cost of generation `/kwh 3.56 3.49
Unit generated per unit of fuel (Coal) kwh/kg 2.24 2.25
B Fuel consumption for Metal Production
(a) L.P.G./Propane
Quantity Million Kg 8.21 5.39
Total Amount `Cr 29.29 20.27
Average cost per Kg `/Kg 35.68 37.60
(b) L.D.O./LSHS/FO
Quantity KL 18091 11602
Total Amount ` Cr 52.34 26.79
Average cost per Ltr `/Ltr 28.93 23.09
(c) Coal for Steam & Others
Quantity MT 28522 30888
Total Amount `Cr 17.2 18.82
Average cost per MT `/MT 6025 6092
(d) Met Coke & Coke breeze
Quantity MT 131478 127018
Total Amount `Cr 255.56 205.55
Average cost per MT `/MT 19437 16183

Certica te of Compliance with the Code of Conduct Policy

As provided under clause 17 (5) (a) of the SEBI (LODR) Regulation 2015 all BoardMembers and the Senior Management personnel have con rmed compliance with the BusinessEthics and Code of Conduct for the year ended on March 31 2017.

For Hindustan Zinc Limited

Sunil Duggal

CEO & Whole-time Director

Place: Mumbai

Date- April 20 2017