We share with you our 55th Annual Report together with the AuditedFinancial Statements for the year ended 31st March 2021.
The Directors are pleased to inform that Hindustan Zinc delivered exemplary operationalperformance while ensuring safe operations and continued to improve on its performance ofvarious ESG metrics. We have taken a pro-active approach to keep our assets and peoplesafe while increasing engagement with our communities during these difficult times.
The year in summary
Mine production progressively improved during the year with ore production for thefull-year up 7% y-o-y to deliver a record 15.5 Mt supported by strong production growthat Zawar mines and Rampura Agucha (RA) Mine which were up 21% and 9% respectively.Operations were halted on account of nationwide lockdown to combat COVID-19 from 22ndMarch 2020 and restarted gradually in April 20. Mined metal production was up 6% y-o-y to972 kt primarily on account of higher ore production with overall grades remaining at samelevels.
During the year back fill plants were commissioned at Zawarmala and Mochia mines. Thedevelopment of North Decline (ND1) was completed at Rampura Agucha Mine. COVID-19restrictions including stringent visa guidelines for Chinese nationals continued duringthe year which resulted in delay in commissioning of Fumer plant at Chanderiya.Feasibility studies are underway at mining locations for expansion to 1.5 Mtpa capacity.
The Company diligently focussed on community upliftment in the areas of EducationSustainable Livelihoods Women Empowerment Health & Water Sports & CultureEnvironment and Community Assets Creation.
I. HEALTH SAFETY AND ENVIRONMENT Occupational Health & Safety
Health & Safety Performance
LTIFR for the year was 0.97 as compared to 1.38 a year ago. In the reporting yearthere has been enhanced leadership focus on incident reporting categorisation &investigation along with greater focus to bring a cultural change in encouraging reportingvia felt leadership programmes safety town halls enabling tools like safetywhistle-blower as well as reward & recognition for near-miss reporting. During theyear the Company commissioned an underground Occupational Health Centre at Rampura AguchaMine which significantly improves the response time in emergency cases.
During the reporting year waste recycling continued at 31% and water recycling rateincreased marginally to 40% (FY2020: 39%). Specific energy consumption improved marginallyto 19.9 GJ/ton of metal (FY2020: 20.4 GJ/ton).
Hindustan Zincs 22 MW solar power project at RA mine was registered under GoldStandard during the year. Dariba Smelting Complex (DSC) successfully commissioned a 4500MTPA FPT (Freeze Precipitation Technology) plant to recover Sodium sulphate from finalmulti-stage RO rejects which will cater to 1/3rd of DSC Hydro smeltersinput salt requirements to support our circular economy goal. CPP Team conducted aninnovative in-house recycling of the bottom ash to convert it into fly ash (saleableproduct) improving value realization and lowering environment footprint. HindustanZincs Udaipur Sewage Treatment Plants expanded to 55 MLD translating into over 90%treatment of citys sewage.
HZL led an endorsement for UNGC (United Nations Global Compact) CEO WaterMandate giving our commitment towards water stewardship and initiating our journeyto follow the six principles laid out by UNGC. As part of commitment towards biodiversityconservation the Company is now a member of IUCN Leader for Nature Indiainitiative. HZL actively participated in the 3rd meeting of BusinessLeaders Group COP26 and actively engaged for shaping the agenda for COP26 which isto be held at Glasgow (UK) in Nov21.
Our sustainability activities received several endorsements during the year includingselection in Sustainability Yearbook 2021 as Member for 4thconsecutive year 1 st position in Asia Pacific region in metal and miningsector in Dow Jones Sustainability Indices and 7th Globally and CII-ITCCorporate Excellence Sustainability Award 2020. Hindustan Zinc was featured among thefirst Indian companies to be featured in CDP India Annual Report and was ratedA in Climate change CDP 2020.
Hindustan Zinc Limited is the first investor requested company in India to respond toCDPs Forests questionnaire and also received Supplier Engagement RatingA from CDP.
II. OPERATIONAL PERFORMANCE Production performance
|Production (kt) ||FY2021 ||FY2020 ||% change |
|Total mined metal ||972 ||917 ||6% |
|Refinery metal production ||930 ||870 ||7% |
|Refined zinc integrated ||716 ||688 ||4% |
|Refined lead integrated1 ||214 ||182 ||18% |
|Production silver (in tons)2 ||706 ||610 ||16% |
1. Ex cluding captive consumption 424 tons in FY2021 vs. 7 of 6 088 tons in FY2020.
2. Excluding captive consumption of 34.6 tons in FY2021 vs. 36.7 tons in FY2020.
For the full-year ore production was up 7% y-o-y to 15.5 Mt on account of strongproduction growth at Rampura Agucha Mine and Zawar mines which were up 9% and 21%respectively. Mined metal production for FY2021 was 971976 tons compared to 917101 tonsin the prior year in line with higher ore production.
For the full year integrated metal production was up 7% to 930 kt in line with higherMIC availability while silver production was up by 16% to a record 706 tons in line withhigher lead production and slightly better grades at SK. These record numbers weredelivered despite losing 3-4 weeks equivalent of production days in the year due to COVIDrelated lockdown and other disruptions resulting from rising infections.
The Company generated 4085 million units of thermal based power in FY2021 as comparedto 3880 million units in FY2020. Total green power generation was 649 million units ascompared to 609 million units in FY2020.
The refined zinc metal sales in the domestic market during the year was 437kt whileexport sales accounted for 287kt as compared to 486kt and 194kt respectively a year ago.The aggregate sales were higher by 6% than previous year in line with production. Leadmetal sales in the domestic market were 181kt while export sales were 35kt leading tohigher aggregate sales of 20% from a year ago in line with the increase in lead metalproduction during the year. Silver sales were 735 tons in FY2021 all in the domesticmarket and 25% higher than previous year.
III. FINANCIAL PERFORMANCE Financial Information
( Rs. in crore)
|Particulars ||FY2021 ||FY2020 |
|Revenue from operations ||22629 ||18561 |
|Other Income ||1819 ||1934 |
|Profit before depreciation interest and tax ||13491 ||10781 |
|Less: Interest ||386 ||112 |
|Less: Depreciation and amortisation expense ||2531 ||2279 |
|Profit before tax ||10574 ||8390 |
|Less: Net tax expense ||2594 ||1585 |
|Net profit ||7980 ||6805 |
|Earnings per share Rs. ||18.89 ||16.11 |
The Company reported Revenue from operations including other operatingincome of Rs. 22629 crore an increase of 22% y-o-y primarily on account of increase inmetal sales and higher silver prices.
The Other income was Rs. 1819 crore during the year compared to Rs. 1934crore in the previous year on account of lower treasury income due to lower rate of returnon fresh investments/ reinvestments during the year on account of lower interest rates.
Zincs cost of production (COP) excluding royalty for FY2021 was Rs. 70681(US$954) per ton lower by 5% y-o-y (9% in US$). The full year COP decrease reflectshigher production volume lower power costs lower metcoke and cement costs partly offsetby higher admin expense (Covid donation) lower sulphuric acid credits and higher dieselcosts.
The above revenue and production cost resulted in profit before depreciation interestand tax (PBDIT) of Rs. 13491 crore in FY2021 up 25% on account of higher revenue andlower cost of production.
Net profit was Rs. 7980 crore up 17% on account of higher PBDIT partly offset byhigher D&A expense and higher effective tax rate. Tax rate for the year was 24.5% ascompared to 18.9% due to reversal of deferred tax liabilities in FY2020 related to prioryears pursuant to Companys expectation of moving to a lower tax regime under Section115BBA of the Income Tax Act 1961.
Earnings Per Share (EPS)
The EPS for the year was Rs. 18.89 per share as compared to Rs. 16.11 per share inFY2020.
Interim dividend of 1065% i.e. Rs. 21.3 per share on equity share of Rs. 2 eachamounting to Rs. 9000 crore was declared in October 2020.
The Dividend Distribution Policy in terms of Regulation 43A of the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 ("SEBI Listing Regulations") is available on the Companys website onhttps:// www.hzlindia.com/wp-content/uploads/ Dividend-Policy-2016.pdf
Credit Rating and Liquidity
CRISIL has reafirmed the Companys long-term rating of AAA/Stable and short-termrating of A1+. The ratings continue to reflect the Companys low cost operationsstrong market position efficient and integrated operations high reserve & resourceand a strong balance sheet.
The Company follows a conservative investment policy and invests in high quality debtinstruments. As on 31st March 2021 the Companys net cash and cashequivalents was Rs. 15130 crore as compared to Rs. 21596 crore at the end of FY2020 andis invested in high quality debt instruments.
( Rs. in crore)
|Particulars ||FY2021 ||FY2020 |
|Opening Cash* ||22207 ||19490 |
|Add: EBITDA** ||11739 ||8849 |
|Add: Net Interest Income ||1258 ||1722 |
|Less: Income Tax ||1755 ||1 135 |
|Less: Dividend ||15972 ||0 |
|Less: Capital Account Payments ||2481 ||3637 |
|Add: Borrowings ||6525 ||-1924 |
|(Increase)/Decrease in Working Capital & Others ||787 ||-1 158 |
|Closing Cash* ||22308 ||22207 |
(*) Includes Cash & Equivalents (refer Note 11 of the Audited FinancialStatements) other bank balances excluding earmarked unpaid dividend accounts balance(refer note 12 of the Audited Financial Statements) and Current Investments (refer Note 9of the Audited Financial Statements).
(**) Earnings before Interest Tax Depreciation and Amortisation expenses and Incomeon investments.
Gross Working Capital
Gross working capital represented by inventory trade receivables and other currentassets decreased from Rs. 2558 crore to Rs. 2180 crore as at 31st March 2021primarily due to decrease of stores & finished goods inventory. The working capitalcycle was 36 days in FY2021 as compared to 51 days in FY2020.
The gross block during the year increased from Rs. 32106 crore to Rs. 34228 crore.This was largely due to the ongoing mining projects and other sustaining capex.
The total capital employed as at 31st March 2021 was Rs. 17183 crore ascompared to Rs. 18714 crore at the end of previous fiscal year mainly due to payment ofdividend in current fiscal year.
Contribution to the Government Treasury
The Company has contributed Rs. 15008 crore during FY2021 in terms of royalties andtaxes to the Government treasury aggregating to approximately 66% of the total revenue.
IV. RESERVE & RESOURCE (R&R)
On an exclusive basis total ore reserves at the end of FY2021 totalled 150.3 Mt andmineral resources totalled 297.6 Mt. Total contained metal in Ore Reserves is 9.16 Mt ofzinc 2.55 Mt of lead and 295.5 million ounces of silver. The Mineral Resource contains14.9 Mt of zinc 6.3 Mt of lead and 618.7 million ounces of silver. At current miningrates the R&R underpins metal production for more than 25 years. This year Companyreplenished 2.7 times more resource than it consumed during the year i.e. there is a grossresource addition of 61.9Mt with a contained metal of 3.1 Mt which is highest resourceaddition in last decade.
We commissioned a 10 MLD STP plant in Udaipur and another 5 MLD STP is in its last legof commissioning which will take the total STP capacity set up by us to 60 MLD. This willtreat almost the entire sewage of Udaipur city and the recycled water will be used by ourplants significantly reducing our fresh water intake.
During the year Graphite floatation system was commissioned at Mill 3 of SindesarKhurd Mines which will enhance the smelter throughput and boost the recovery.
During the year back fill plants were commissioned at Zawarmala and Mochia mines.These plants will de-risk operations and provide opportunity to mine left-out high-gradeore in pillars. On similar lines we have also started execution activities for combinedpaste-fill and dry tailing plant at Rajpura Dariba which will help in increasing oreproduction from 1.2 Mtpa to 2 Mtpa. This will also facilitate in additional utilization oftails by ~20% for back-filling and will reduce stope turnaround time.
The development of North Decline (ND1) was completed at Rampura Agucha Mine (RAM). Thisimproves the accessibility of shaft section alternate emergency evacuation ease in mineequipment deployment at lower levels of mine face charging with emulsion explosives facedrilling with long feed jumbo etc.
We have started operations in RKD circuit (component of overall Fumer project) to treatRaw Zinc Oxide (RZO). COVID-19 restrictions including stringent visa guidelines forChinese nationals continued during the year which resulted in delay in commissioning ofFumer plant at Chanderiya. We are following up with authorities to find a solution.
VI. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Companys CSR passionately focuses on community upliftment through EducationSustainable Livelihoods Women Empowerment Health & Water Sports & CultureEnvironment and Community Assets Creation.
During the year the Company spent Rs. 214 crore on CSR programmes as compared to Rs.132 crore in previous year. For further details refer Annexure 3 and BusinessReview section of this Annual Report.
During the year under review following changes took place in the Board of Directors:
Pursuant to expiry of the appointed tenure of Mr. Sunil Duggal as CEO & WTD on 31stJuly 2020 Mr. Arun Misra was appointed as CEO & WTD of the company w.e.f 1stAugust 2020.
Similarly Mr. Akhilesh Joshi and Mr. Anjani Kumar Agrawal were appointed asIndependent Directors w.e.f 1st August 2020 upon the expiry of the appointedtenure of Mr. A R Narayanaswamy and Mr. Arun L Todarwal on 31st July 2020.
Government of India Ministry of Mines appointed Ms. Yatinder Prasad on the Board w.e.f7th August 2020 in place of Mrs. Reena Sinha Puri.
The companys policy on appointment of Directors and their remuneration isavailable on the Companys website https://www.hzlindia.com/wp-content/uploads/HZL-Nomination-Remuneration-Policy-20.1.2020.pdf
VIII. MANAGEMENT DISCUSSION AND ANALYSIS
The Our Operational Performance section of this Annual Report gives adetailed account of the Companys operations and the market in which it operatesincluding its initiatives in areas of human resources sustainability and risk management.
IX. 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 certificate ofcompliance from the statutory auditors forms part of this report. Further BusinessResponsibility Report describing the initiatives taken by the Company from anEnvironmental Social and Governance perspective also forms a part of this report. Inorder to maintain transparency and efficient governance various disclosures as requiredunder Sections 134 and 135 of the Companies Act 2013 are annexed to this report orcovered in the Corporate Governance Report such as Related Party Transactions;Information and details on conservation of energy technology absorption foreign exchangeearnings and outgo; extract of annual return; constitution of various Board levelCommittees; Annual Report on CSR etc.
X. DIRECTORS RESPONSIBILITY STATEMENT
As required under Section 134(5) of the Companies Act 2013 the Board of Directorsto the best of their knowledge and ability confirm that:
i. In the preparation of the annual accounts the applicable accounting standards havebeen followed and there are no material departures;
ii. they have selected such accounting policies and applied them consistently and madejudgements & estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of the financial year and of theprofits of the Company for that period.
iii. they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.
iv. the annual accounts have been prepared on a Going Concern basis.
v. they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively;
vi. they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company the work performed by the internal statutoryand secretarial auditors and external consultants including the audit of internalfinancial controls over financial reporting by the statutory auditors and the reviewsperformed by management and the relevant board committees including the audit committeethe Board is of the opinion that the Companys internal financial controls wereadequate and effective during FY2021.
XI. BOARD EVALUATION
The Board of Directors has carried out an annual evaluation of its own performanceboard committees and individual directors pursuant to the provisions of the Act and SEBIListing Regulations.
The performance of the board was evaluated by the Board after seeking inputs from allthe directors on the basis of criteria such as the board composition and structureeffectiveness of board processes information and functioning etc.
The performance of the committees was evaluated by the Board after seeking inputs fromthe committee members on the basis of criteria such as the composition of committeeseffectiveness of committee meetings etc.
The above criteria are broadly based on the Guidance Note on Board Evaluation issued bythe Securities and Exchange Board of India on 5th January 2017.
In a separate meeting of independent directors performance of non-independentdirectors the Board as a whole and Chairman of the Company was evaluated taking intoaccount the views of executive directors and non-executive directors.
The Board and the Nomination and Remuneration Committee reviewed the performance ofindividual directors on the basis of criteria such as the contribution of the individualdirector to the board and committee meetings like preparedness on the issues to bediscussed meaningful and constructive contribution and inputs in meetings etc.
At the board meeting that followed the meeting of the independent directors and meetingof Nomination and Remuneration Committee the performance of the Board its Committeesand individual directors was also discussed. Performance evaluation of independentdirectors was done by the Board members excluding the independent director who is beingevaluated.
XII. INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY
The details in respect of internal financial control and their adequacy are included inthe Management Discussion and Analysis which is a part of this report.
The Company had appointed M/s. S. R. Batliboi & Co. LLP Chartered Accountants asStatutory Auditors of the Company to conduct audit of Financial Statements for the yearended 31st March 2021. The Notes to Financial Statement referred to in theAuditors Report are self-explanatory and do not call for any further comments. TheAuditors Report does not contain any qualification or reservation. The only adverseremark in CG certificate is for not fulfilling the criteria of adequate number ofIndependent Directors including woman independent director and for which we are in touchwith the two major shareholders and purchase of Bonds from holding company which isself-explanatory.
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. Chandrasekaran Associates Company Secretaries as the SecretarialAuditors for conducting the Secretarial audit of the
Company. Their report does not contain any qualification or reservation. The onlyadverse remark is for not fulfilling the criteria of adequate number of IndependentDirectors including woman independent director for which we are in touch with the twomajor shareholders and other procedural delays due to COVID-19 which areself-explanatory.
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 whosee-mail addresses are registered.
XIV. VIGIL MECHANISM
The Company has a Whistle Blower Policy and has established the necessary vigilmechanism for directors and employees in confirmation with Section 177(9) of the Act andRegulation 22 of Listing Regulations to report concerns about unethical behaviour. ThisPolicy is available on the Companys website on https://www.hzlindia.com/wp-content/uploads/HZL-WHISTLE-BLOWER-POLICY-19.10.2015.pdf
XV. ANNUAL RETURN
Pursuant to Section 92(3) read with Section 134(3)(a) of the Act the Annual Return ason 31st March 2021 is available on the Companys website onhttps://www.hzlindia.com/investors/ reports-press-releases/
XVI. 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 provisionsof 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 first 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 Office of the Companyduring working hours. Any member interested in obtaining such information may write to theCompany Secretary at the registered office and the same will be furnished on request.Further the details are also available on the Companys website: www.hzlindia.com.
In line with the internal guidelines of the Company no payment is made towardscommission to the Executive Director of the Company who is in full time employment withthe Company.
The Company being one of the top companies in the country in terms of marketcapitalization has voluntarily provided Integrated Report which encompasses bothfinancial and non-financial information to enable the Members to take well informeddecisions and have a better understanding of the Companys long-term perspective. TheReport also touches upon aspects such as organisations strategy governanceframework performance and prospects of value creation based on the six forms of capitalviz. financial capital manufactured capital intellectual capital human capital socialand relationship capital and natural capital.
We sincerely thank our customers vendors investors business partners workerunions auditors and bankers for their continued support during the year. We place onrecord our appreciation of the contribution made by employees at all levels. Our continuedsuccess was made possible by their hard work solidarity commitment and support. We thankthe Government of India the State Governments of Rajasthan Andhra Pradesh GujaratKarnataka Tamil Nadu Maharashtra and Uttarakhand for their continued support.
|For and on behalf of the Board of Directors |
|Arun Misra ||Anjani K Agrawal |
|CEO & Whole-time Director ||Director |
|Place: Udaipur ||Mumbai |
|Date: 27th April 2021 || |