As on: Oct 01, 2023 10:09 AM
Dear Members,
We share with you our 56th Annual Report, together with the Audited Financial Statements for the year ended 31st March, 2022.
The Directors are pleased to inform that Hindustan Zinc delivered exemplary operational performance while ensuring safe operations and continued to improve on its performance of various ESG metrics. The company has taken a pro-active approach to keep its assets and people safe, while increasing engagement with the communities during challenging times.
THE YEAR IN SUMMARY
We delivered stellar results during the year touching new operational milestones. The company delivered historic-high ore production for the full year at 16.3 million MT driven by concerted efforts towards bolstering mine production across most of the mines. The company also crossed 1 million tonne mined metal production mark for the first time producing 1,017 kt of mined metal.
Mine development, registering 10% y-o-y growth, crossed 100 km mark for the 1st time in line with increasing production requirements and securing future resource base.
Rampura Agucha has successfully commissioned 2nd underground crusher along with conveyor system enabling full utilization of 3.75 Mt main shaft hoisting capacity.
The Company diligently focussed on community upliftment in the areas of Education, Sustainable Livelihoods, Women Empowerment, Health & Water, Sports & Culture, Environment and Community Assets Creation.
The Company is ranked 1st in Asia-Pacific and globally 5th in Dow Jones Sustainability Index in 2021 amongst Mining & Metal companies. (1st in environment Dimension among the metal and mining sector globally). The Company has also won the 1st Bronze Medal and has been featured in the prestigious Sustainability Yearbook for the fifth year in a row by S&P Global.
I. HEALTH, SAFETY AND ENVIRONMENT
Occupational Health & Safety Health & Safety Performance
LTIFR for the year was 0.81 as compared to 0.97 a year ago. It is with deep sadness that we report the regret of four colleagues (Business partners) in work-related incidents at our operations. These incidents happened despite continuous efforts to eliminate fatalities and attain zero-harm work environment. Thorough investigations were conducted to identify the causes of these incidents and to share lessons learnt across HZL operations, with the aim of preventing repeat or similar incidents.
There has been enhanced leadership focus on incident reporting, incident categorisation & incident investigation along with greater focus on horizontal deployment of learnings across HZL and critical risk management.
During the year, the Company commissioned first made-in-India emergency escape route (staircase type) in at Rajpura Dariba Underground Mine as well as underground rescue station at Rampura Agucha Mine, both of which will significantly improve the response time in case of an emergency. Qualitative and Quantitative Exposure Assessment is completed for all units and exposure mitigation plan is developed. 22 Digitized safety modules were launched for easy understanding of safety standard requirements.
Demonstrating the highest standards of health and safety management during the year, Chanderiya CPP and Debari both received the prestigious ‘Sword of Honour? from British Safety Council for showing excellence in the management of health and safety risks at work. Kayad Mine was also awarded the National Safety Award from the Government of India for the longest accident-free operations in the metal and mining sector as well as for the lowest injury frequency rate.
ENVIRONMENT
During FY 2021-22, waste recycling increased marginally to 31% (FY 2020-21: 30%), and water recycling rate increased to 44% in (FY 2020-21: 39%). Specific energy consumption for FY2021-22 was 48 GJ/MT of metal (FY 2020-21: 51 GJ/MT).
Hindustan Zinc commits to ‘Long-term target to reach net-zero emissions by 2050? in alignment with Science Based Targets initiative (SBTi) aiming to have clearly defined path to reduce emissions in line with the Paris Agreement goals. Company has made notable technological advancements in energy conservation. Zinc Smelter Debari has revamped the cell house and eliminated current losses through electrolytic cells by successfully replacing 600+ concrete cells with poly-concrete cells. As a result, the power rating has improved. Additionally, the turbine revamping project is certified as a carbon reduction project by VERRA (the world?s most widely used voluntary GHG program) resulting in avoidance of GHG emissions of 270,000 tCO2e per year. For decarbonizing the future of Indian mining, Hindustan Zinc has partnered with leading global manufacturers for introducing Battery Electrical Vehicles (BEVs) in its underground mines. All units of HZL are certified as ISO 50001 (Energy Management system).
Hindustan Zinc has published its first TCFD (Task Force on Climate-related financial disclosure) report during the year, adapting the TCFD framework for climate change risk and opportunity disclosure. HZL actively participated in ‘Business Leaders Group COP26? and contributed in shaping the agenda for COP26 which was held at Glasgow (UK) in Nov?21. Endeavouring towards sustainable organization, HZL enhanced the governance by establishing Board Level ESG & Sustainability Committee to overview the ESG progress of the organization.
Hindustan Zinc joined the Taskforce on Nature-Related Financial Disclosures (TNFD) forum to tackle nature- related risks. Miyawaki Method of Afforestation pilot project completed at Debari Zinc Smelter (DZS) and horizontal deployment will be done across HZL. 3-year Engagement with International Union for Conservation of Nature (IUCN) will help in development of Biodiversity Management Plan focusing No Net-Loss approach to achieve Sustainability Goals 2025.
One of the most notable achievements has been the successful commissioning of a 3,000 KLD Zero Liquid discharge plant at the Zinc Smelter Debari. The company has also commissioned 5 MLD Sewage Treatment Plant (STP) in Udaipur, bringing the total Udaipur STP capacity built by Hindustan Zinc to 60 MLD. In the area of water stewardship, Rampura Agucha Mine has also completed the execution of groundwater recharge intervention across 4 blocks of Bhilwara district having ground water recharge potential of 8.7 million cubic meter (MCM)/ annum.
Board has approved a long-term captive renewable power development plan up to a capacity of 200 MW. The project will be built under the Group captive norms and on Build Own Operate basis. The power delivery is expected to start from 2025. Hindustan Zinc?s sustainability initiatives received several accolades & endorsements during the year
• The Company is ranked 1st in Asia-Pacific and globally 5th in Dow Jones Sustainability Index in 2021 amongst Mining & Metal companies. (1st in environment Dimension among the metal and mining sector globally)
• Company won the 1st Bronze Medal and has been featured in the prestigious Sustainability Yearbook for the fifth year in a row by S&P Global.
• The company received the award for ‘Outstanding Accomplishment in Corporate Excellence and Dariba smelter received the award for excellence in Environment management? in 16th CII-ITC Sustainability Awards.
• HZL received IEI Industry Excellence Award 2021, instituted by The Institution of Engineers (India)
• HZL?s RAM and Kayad mines received 5 Star Rated Mines? award by the Ministry of Mines, Govt. of India.
• Hindustan Zinc wins at ESG India Leadership Awards - Leadership in Environment and Green House Gas Emissions Reduction Categories organized by ESGRisk.ai , India?s first ESG rating company.
• HZL has been awarded the Most Sustainable Company in the Mining Industry by World finance at their Sustainability Awards 2021
II. OPERATIONAL PERFORMANCE
Production performance
Production
For the full-year, ore production was up 6% y-o-y to 16.3 million tonnes on account of strong production growth at Zawar and Sindesar Khurd mines, which were up 12% and 8% respectively. Mined metal production for FY 2021-22 was 1,017 kt compared to 972 kt in previous year
For the full year, integrated metal production was up 4% to 967 kt due to higher plant & concentrate availability. Lead production was lower on account of operating the Pyro plant at CLZS at Zinc-Lead mode rather than Lead mode. Silver production was down by 8% to 647 MT in line with lower lead metal production.
The Company generated 3,891 million units of thermal based power in FY 2021-22. Total green power generation was 720 million units as compared to 649 million units in FY 2020-21.
Sales
During the year, domestic refined zinc metal sales was 506 kt as against 437 kt last year. While export sales for the year stood at 271 kt as compared to 287 kt a year ago. The aggregate sales were higher by 7% than previous year, in line with production. Lead metal sales in the domestic market were 167 kt, while export sales were 25 kt leading to lower aggregate sales of 11% from a year ago, in line with the decrease in lead metal production. Silver sales were 647 MT in FY 2021-22, all in the domestic market and 12% lower than previous year.
III. FINANCIAL PERFORMANCE
We share with you our 56th Annual Report, together with the Audited Financial Statements for the year ended March 31, 2022.
Financial Information
(Rs in crore)
Revenue
The Company reported Revenue from operations including other operating income of Rs 9,440 crore, an increase of 30% y-o-y primarily on account of increase in LME prices supported by higher metal sales due to increase in production
The Other income was Rs,216 crore during the year compared to Rs,819 crore in the previous year in line with lowering rate of return in current year to 4.7% as against 7.8% in the previous year.
Production Cost
Zincs cost of production (COP), excluding royalty for FY 2021- 22 was Rs 3,511 (US$ 1,122) per tonne, higher by 18% y-o-y. The full year COP was higher impacted largely on account of higher coal prices & input commodity inflation, partly offset by higher volume, better Sulphuric Acid realizations & improved recoveries.
Operating margin
The above revenue and production cost resulted in profit before depreciation, interest and tax (PBDIT) of Rs7,441 crore in FY 2021-2, up 29% on account of higher volumes, rise in LME prices partially offset by higher coal and input commodity prices.
Net profit
Net profit was Rs ,629 crore, up 21% where in the impact of higher PBDIT was partly offset by lower investment income due to declining interest rate environment. Effective Tax rate
Cash Flows
for the year increased to 31.7% as compared to 24.5%, mainly due to end of certain tax benefits.
Earnings Per Share (EPS)
The EPS for the year was Rs 2.79 per share as compared to Rs8.89 per share in FY 2020-21.
Dividend
Interim dividend of 900%, i.e. Rs8.0 per share on equity share of Rs each amounting to Rs ,606 crore was declared in December 2021.
The Dividend Distribution Policy, in terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations") is available on the Companys website on https://www.hzlindia.com/wp-content/uploads/ Dividend-Policy-2016.pdf
Credit Rating and Liquidity
CRISIL has reaffirmed the Companys long-term rating of AAA/Stable and short-term rating of A1+. The ratings continue to reflect the Companys low-cost operations, strong market position, efficient and integrated operations, high reserve & resource and a strong balance sheet.
The Company follows a conservative investment policy and invests in high quality debt instruments. As on March 31, 2022, the Companys net cash and cash equivalents was Rs7,966 crore as compared to Rs 5,130 crore at the end of FY 2020-21 and is invested in high quality debt instruments.
Gross Working Capital
Gross working capital represented by inventory, trade receivables and other current assets increased from Rs ,180 crore to Rs,132 crore as at March 31, 2022 primarily due to increase in raw material inventory, trade receivables and coal stock for ensuring coal security and to combat any potential price increase. The working capital cycle was 40 days in FY 2021 -22 as compared to 36 days in FY 2020-21.
Gross Block
The gross block during the year increased from Rs 4,228 crore to Rs 7,455 crore. This was largely due to the ongoing mining projects and other sustaining capex.
Capital Employed
The total capital employed as at March 31, 2022 was Rs 6,315 crore, as compared to Rs 7,183 crore at the end of previous fiscal year.
Contribution to the Government Treasury The Company has contributed Rs 5,676 crore during FY 2021-22, in terms of royalties and taxes to the Government treasury, aggregating to approximately 53% of the total operating revenue.
IV. RESERVE & RESOURCE (R&R)
On an exclusive basis, total ore reserves at the end of FY 2021-22 stood at 161.21 million tonnes (net of depletion of FY 2021-22 production of 16.34 million tonnes) and exclusive mineral resources totalled 286.73 million tonnes. Total contained metal in Ore Reserves is estimated at 9.57 million tonnes of zinc, 2.45 million tonnes of lead and 298.4 million ounces of silver. The Mineral Resource contains approximately 13.18 million tonnes of zinc, 5.86 million tonnes of lead and 576.3 million ounces of silver. At current mining rates, the R&R underpins metal production for more than 25 years.
V. PROJECTS
In HZL journey of 1.25 mtpa MIC expansion, some of key projects are under execution at RD Mines complex. We have successfully completed RD Mines Shaft & Conveyor upgradation for enhancement of ore hoisting capacity in Q3 FY 2021-22. In line with our ESG journey, we have completed installation of Dry Filtration & Paste fill plant to enable effective tailings managements by switching from Wet to Dry tailing management system. Commissioning of plant will start by Q1 of FY 2022-23. For enhancing metal recovery, we have placed order for RD Beneficiation plant revamping, enabling better Pb, Zn & Ag recoveries and improving plant reliability by replacing obsolete Grinding, Floatation & Filtration circuits. Civil construction is already ongoing and plant is scheduled to be commissioned in Q3 FY 2022-23.
At Zawar, in order to enhance the ventilation capacities and working conditions of West Mochia and North Baroi mines, installation of underground ventilation fans has started. For increasing the capacity of Tailing storage Facility, design and stabilisation studies have been conducted and the dry stacking is under progress.
Treatment of Raw Zinc Oxide (RZO) in RKD circuit (component of overall Fumer project) continued during the entire year. For the Fumer commissioning, visa process is in advanced stages for the technical experts. The Fumer commissioning is targeted for completion by early FY 2022-23.
VI. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Companys CSR initiatives passionately focuses on community upliftment by strengthening the local economy and improving the quality of life by working in the areas of Education, Sustainable Livelihoods, Women Empowerment, Health, Water & Sanitation, Sports & Culture, Environment & Safety and Community Assets Creation.
During the year, the Company spent Rs90.92 crore on CSR programmes more than the 2% of CSR mandate which was Rs86.68 crore. For further details, refer Annexure III and Business Review section of this Annual Report
VII. DIRECTORS
Government of India, Ministry of Mines appointed Ms. Nirupama Kotru in place of Ms. Yatinder Prasad w.e.f. July 26, 2021. Ms. Veena Kumari Dermal also appointed as director w.e.f. July 29, 2021.
The companys policy on appointment of Directors and their remuneration is available 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 a detailed account of the Companys operations and the market in which it operates, including its initiatives in the 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 agreements of the Stock exchanges. A report on Corporate Governance, along with a certificate of compliance from the statutory auditors, forms part of this report. Further, Business Responsibility and Sustainability Report describing the initiatives taken by the Company from an Environmental, Social and Governance perspective, also forms a part of this report. In order to maintain transparency and efficient governance, various disclosures as required under Sections 134 and 135 of the Companies Act, 2013 are annexed to this report or covered in the Corporate Governance Report, such as Related Party Transactions; Information and details on conservation of energy, technology absorption, foreign exchange earnings and outgo; extract of annual return; constitution of various Board level Committees; Annual Report on CSR, etc.
X. DIRECTORS RESPONSIBILITY STATEMENT
As required under Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability confirm that:
i. In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;
ii. t hey have selected such accounting policies and applied them consistently and made judgements & estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period.
iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets 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 and that such internal financial controls are adequate and were operating effectively;
vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. Based on the framework of internal financial controls and compliance systems established and maintained by the Company, the work performed by the internal, statutory and secretarial auditors and external consultants, including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by management and the relevant board committees, including the audit committee, the Board is of the opinion that the Companys internal financial controls were adequate and effective during FY 2021-22.
XI. BOARD EVALUATION
The Nomination and Remuneration Committee has devised a criteria for evaluation of the performance of the Directors including the Independent Directors. The said criteria provides certain parameters like attendance, acquaintance with business, communication inter se between board members, effective participation, domain knowledge, compliance with code of conduct, vision and strategy, benchmarks established by global peers etc., which is in compliance with applicable laws, regulations and guidelines.
During the year, Company engaged Deloitte Haskins & Sells LLP for carrying out the performance evaluation of all the Board members, Board as a whole and various committees.
The criteria used by them basis which the individual director performance evaluation has been done included:
• preparation and participation in Board meetings,
• personality and conduct,
• quality of value added,
• understanding of the Companys mission, vision, philosophy and strategy,
• understanding of the industry and the business in which the Company operates,
• independence of judgement,
• independent thinking ability to bring a divergent view, etc.
CEO & Whole Time Director evaluation was more focused towards Company performance and leadership, team building and management succession, edge in execution of strategy formulated by the Board.
The evaluation of the various Board Committees was more focused towards:
• Its charter/ terms of reference
• Number of meetings held and its appropriateness
• Timely availability of information
• Committee composition
• Committee decisions are adequately conveyed and implemented
• Meetings are conducted in a manner that ensures open communication, meaningful participation and timely resolution of issues
• Independency of committee to contribute effectively
Assessment of each director on the board is done by the other directors including that of various committees. The consolidated outcome from all the directors is prepared by Chairman of nomination and remuneration committee and presented to the board of directors. All the directors had been rated excellent and overall finding shows that the Board and its various committees are working well. All Board members come with very strong background and add lot of value to the meetings by making them participative and engaging.
XII. INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY
The details in respect of internal financial control and their adequacy are included in the Management Discussion and Analysis, which is a part of this report.
XIII. AUDITORS
The Company had appointed M/s. S. R. Batliboi & Co. LLP, Chartered Accountants, as Statutory Auditors of the Company to conduct audit of Financial Statements for the year ended March 31, 2022. The Notes to Financial Statement referred to in the Auditors Report are self-explanatory and do not call for any further comments. The Auditors Report does not contain any qualification or reservation. The only adverse remark in CG certificate is for not fulfilling the criteria of adequate number of Independent Directors including woman independent director and for which we are in touch with the two major shareholders, which is self-explanatory.
Pursuant to the orders issued by the Central Government under Section 148 of The Companies Act, 2013, the Board has appointed M/s. K G Goyal & Co. Cost Accountants for conducting the audit of the cost accounting records maintained by the Company for all its products and M/s. Vinod Kothari & Company, Company Secretaries as the Secretarial Auditors for conducting the Secretarial audit of the Company. Their report does not contain any qualification or reservation. The only adverse remark is for not fulfilling the criteria of adequate number of Independent Directors including woman independent director, for which we are in touch with the two major shareholders and other procedural delays due to COVID-19, which are self-explanatory.
As per provisions of Section 136 of the Companies Act, 2013, the Annual Report including the Audited Accounts for the year will be sent to all the Shareholders whose e-mail addresses are registered.
XIV. VIGIL MECHANISM
The Company has a Whistle Blower Policy and has established the necessary vigil mechanism for directors and employees in confirmation with Section 177(9) of the Act and Regulation 22 of Listing Regulations, to report concerns about unethical behaviour. This Policy 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 as on March 31, 2022 is available on the Companys website https://www. hzlindia.com/investors/reports-press-releases/
XVI. PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial 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 showing the names and other particulars of employees drawing remuneration in excess of the limits set out in the said Rules forms part of the Report. However, having regard to the provisions of the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report 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 Company during working hours. Any member interested in obtaining such information may write to the Company 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 towards commission to the Executive Director of the Company, who is in full time employment with the Company.
XVII. INTEGRATED REPORT
The Company being one of the top companies in the country in terms of market capitalization, has voluntarily provided Integrated Report, which encompasses both financial and non-financial information to enable the Members to take well informed decisions and have a better understanding of the Companys long-term perspective. The Report also touches upon aspects such as organisations strategy, governance framework, performance and prospects of value creation based on the six forms of capital viz. financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital and natural capital.
XVIII. ACKNOWLEDGEMENTS
We sincerely thank our customers, vendors, investors, business partners, worker unions, auditors and bankers for their continued support during the year. We place on record our appreciation of the contribution made by employees at all levels. Our continued success was made possible by their hard work, solidarity, commitment and support. We thank the Government of India, the State Governments of Rajasthan, Andhra Pradesh, Gujarat, Karnataka, Tamil Nadu, Maharashtra and Uttarakhand for their continued support.