Silver shines for Hindustan Zinc in Q3; govt's green push may raise demand

Silver sales saw a boost for Hindustan Zinc (HZL) in the Q3FY24, driven by the traditional wedding season, the government’s focus on renewable energy and the company prioritising production as part of its short-term strategy. The company aims to touch 1,000-tonne capacity in the next two to three years. In Q3FY24, silver-related sales for HZL were up 44 per cent from a year ago. Profit from this segment also witnessed a fillip, up by almost 50 per cent.

In its results commentary, HZL noted the company has delivered record nine-months mined silver production to cash in elevated silver price opportunities. In a call with analysts, HZL’s management noted that the silver segment now accounts for over 45 per cent of the company’s profit in FY24 as compared to 27 per cent in the last year.

Arun Misra, the company’s chief executive officer, told Business Standard that it is a short-term strategy. He added, “In the March-24 quarter, the trend will reverse to zinc production, and silver production will be lower,” he said.

Commenting on the higher demand for silver, Misra added, “Q3 has a lot of traditional marriage events, plus the government is also focusing on renewables that is also bringing in industry demand.”

For the nine months of FY24, HZL also saw the company’s highest silver production ever at 556 tonnes. In FY23, HZL’s annual silver production was at 714 tonnes, catering to roughly 10 per cent of India’s overall silver demand. The majority of the country’s demand originates from households.

Misra, however, expects India’s push for renewable energy to increase industrial demand for the metal.

“In another two-three years, 30-40 per cent of the domestic consumption would go to industrial,” he said.

Globally, silver’s use in photovoltaics increased to 140.3 million ounces in 2022, and that for the automobile industry is projected to touch 90 million ounces annually by 2025, according to the Silver Institute.

As part of HZL’s business restructuring proposal, the silver division is to be housed into a separate entity.

“That is the long-term plan. Meanwhile, the strategy is to maximise silver production,” Misra said, adding that 1,000 tonnes is the long-term vision, likely to be met in two to three years.

Analysts with Nuvama in their post-earnings note on the company said, “Hindustan Zinc is ramping up its fumer plant, which should provide additional 30 tonnes of silver in FY25 and shall give earnings a fillip.” The brokerage firm has factored a silver volume of 790 tonnes in for the next financial year.