Hindustan Zinc Limited (500188) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Hindustan Zinc Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Arora, Head of Investor Relations. Thank you, and over to you, ma'am.

Thank you. Good afternoon, everyone. I welcome you all to Hindustan Zinc's Third Quarter and 9 months ending FY '22 results briefing. On behalf of Hindustan Zinc, I wish you and your family a very happy new year, 2022. Today on the call, we have with us our CEO, Mr. Arun Misra; and our Interim CFO, Mr. Sandeep Modi. Mr. Misra will begin with an update on business performance, while Mr. Modi will walk you through financial performance. After which, we will open the floor for questions. I now request Mr. Misra to begin today's call. Over to you, Mr. Misra.

Thank you, Shweta. Good afternoon, everyone. Thank you for joining us today for the third quarter results. First of all, I would like to wish you all and your loved ones a very Happy New Year 2022. May this year brings the best of health and success to each one of you. With the recent rise in COVID cases in the country due to the new variant, it's important to mask up, vaccinate and help control the spread. I'm happy to inform that almost all of our employees, business partners and their family members have been administered with the second dose of the vaccine. This has helped us to control the positivity rates and improve recovery rates, which minimize the need of hospitalization. We have also started administering vaccination for all eligible kids of employees and business partners as well as the booster doze as per government protocol. Before I begin today's results presentation, I regret to inform you all that we lost one of our colleagues in an unfortunate accident that happened at our Baroi mine, part of Zawar Group of mines on the 3rd of November 2021. I would like to offer my deepest condolences to the bereaved family and friends of the deceased. One life lost is one too many. We commit to stand by the family in this hour of distress. We have conducted an in-depth incident investigation through an independent investigation committee. The learnings from the incidents have been reviewed and are being implemented across all our operating assets. Coming to an update on the ESG front, I'm happy to inform that not only have we maintained our first rank in Asia Pacific in the Dow Jones Sustainability Index amongst metal and mining peers, we are also #1 globally in the environment category. At the overall level, we have moved up from seventh position to fifth position globally. This is highly encouraging and gives us confidence to march ahead on our ESG vision. We are also committed to spend $1 billion for our green energy initiative and reduce our carbon emissions. We will continue to focus and make sustained efforts to reduce our dependence on nonrenewable sources of energy and bring the share of renewable energy to over 50% in the next 3 years. We have already released an expression of interest for 300-megawatt renewable energy round-the-clock sourcing at Dariba. The power purchase agreement signing for the sale is under progress. To preserve the biodiversity around our locations, we have signed up for a 3-year engagement with the International Union for Conservation of Nature, IUCN, for the development of a Biodiversity Management Plan focusing on a no net loss approach to achieve our Sustainability Goal 2025. We maintained 0 liquid discharge at all our locations. I am also happy to inform that we have formed the Board level ESG and Sustainability Committee and its first meeting was conducted in December 2021. These are some of the timely steps required for us to achieve our commitment of net zero by 2050. Coming to an update on CSR activities. Our CSR team has continued their efforts on ground catering to lives, livelihood and oxygen supply during the COVID period. In addition, they have done significant work in creating strong self-sustaining institutions on ground, be it through efforts of creating farmer-producer companies in 5 districts of Rajasthan or converting microfinance organizations into legal entities to create sustained platforms for enhancing the local economy. We continue to see our CSR role to be [ database aggregator ] to create such micro enterprises, which will assist in strengthening the local economy by engaging and enhancing the ownership of the communities. We have formed a not-for-profit company to manage the Zinc Football Academy. This will help the academy to participate in football at a professional level under the events organized by All India Football Federation. This is an essential platform to provide competitive exposure to our budding football stars. I'm happy to share that Hindustan Zinc has won the Leaders for Social Change award by Socio Story Foundation for their SAKHI women empowerment initiatives. Our CSR team was also awarded at CMO Asia’s Best CSR Practices Award forum in the Best Overall Excellence category. I am elated to share that our people practices were recognized in the form of People First HR Excellence Award. I'm also happy to share that our leaders at Hindustan Zinc were recognized at General (sic) [ Great ] Managers Awards, which is joint initiative between People Business and the Economic Times to recognize and reward Great Managers in the country. Turning to market update. The rapid spread of Omicron COVID variant is clearly a source of uncertainty for the global economic outlook. Base case assumptions is that like the Delta variant before it, the impact on global growth will be modest. However, the new variant is likely to ensure that supply chain issues are now likely to remain a significant feature of the global economy in 2022. And as has been the case in 2021, it may delay the meeting of pent-up demand for zinc-intensive manufactured goods. According to WoodMac data, mine supply in 2021 has rebounded following the sharp fall in 2020. Mine capability is also expected to further rise in the medium term. Zinc price retreated from its year-to-date cash high -- $3,800 per tonne. Even though, we are yet to see real evidence of sizable smelter contracts, spot refined metal premium in all regions have received a boost and some annual contract premium in Europe and the U.S. for 2022 are expected to double. Higher power prices in Europe and China remain key risks to watch out for in terms of refined metal production. Talking about LME exchange stocks. At the current level, they are only sufficient to meet 7 days of global demand, which is one of the lowest levels for the calendar year 2021. We drilled relatively low stops, supply-side disruptions and robust demand will continue to put upward pressure on spot metal premiums globally. At a global level, zinc demand supply market remains tight and uncertainty is pertaining to refined metal output due to rising energy prices and smelters either reducing output or going into care and maintenance keeps premium high. This, in our view, should continue to support prices in the short to medium term. On the domestic front, India's manufacturing sector activities moderated in December and as per the survey-based IHS Markit India Manufacturing PMI eased to 55.5 from the 10-month high of 57.6 in November. We are still decisively in the expansionary phase, but input cost inflation is at one of the highest levels in around 7.5 years as per the report. This is a constant concern in addition to supply chain disruptions. As for domestic zinc demand, government spending continues in infrastructure, highways, electrification and transmission projects. So structural tailwinds for the metal are intact, and we do not face any issues of selling in our stocks in the Indian market. Coming to lead. Lead prices remained relatively flat on a sequential basis. Battery demand has been quite modest in the December so far. Battery producers did experience some rise in demand earlier in the month when SHG prices started increasing, triggering buying from the distributors and retailers, but this activity slowed down when the SHG prices stabilized, after which battery demand was met from inventory wherever possible. Coming to silver, it has benefited from a noticeable improvement in market fundamentals over the last quarter. Economic momentum, easing lockdown restrictions and comparatively weaker silver prices, along with the month-long festive and wedding season has helped silver demand recover strongly, although it is still expected to fall sort of pre-pandemic levels. Demand in rural areas saw twice the growth rate with respect to metro cities, which can be routed to ample monsoon and healthy harvest, resulting in higher disposable income. Coming to update on operational performance. During the quarter, mined metal production was at 252 kt, up 3.4% year-on-year. And for 9 months, it was at 722,000 tonnes, up 5.5% year-on-year. This was on account of higher gold production at Sindesar Khurd, Rampura Agucha and Zawar mines, improvement in recoveries partly offset by lower mining grade. Subsequently mined metal production grew by 1.4% sequentially mainly due to higher ore treatment at Kayad and Sindesar Khurd mines and improvement in recovery. Integrated metal production was 261,000 tonnes for the quarter, up 11% year-on-year and up 25% sequentially. This was supported by better plan and mined metal availability and improved operating parameters. Integrated zinc production was 214,000 tonnes, up 17% year-on-year and up by 32% sequentially. Integrated lead production for the quarter remained flat sequentially at 47,000 tonnes but was down 10% year-on-year on account of Pyro plant of Chanderiya operations on zinc-lead mode compared to lead mode only. Overall, for the 9-month period, metal production was 707,000 tonnes, up 5% year-on-year in line with better plant and mined metal availability. Integrated silver production was 173 tonnes, down 5% year-on-year, in line with lower lead production but up 14% from last quarter. For the 9-month period, silver production was 4% lower to 485 tonnes, in line with the lower lead metal production and depletion of the Silver WIP. Our 9-month mine development was also at historic high level. At the current run rate of production, we are confident to deliver on the 1 million tonne production mark this year. As discussed last quarter, the deliveries of our new equipment orders have started, and this will further aid our operational efficiencies and improve equipment reliability, which is very critical in our business. Coming to project update. We are stepping forward towards fulfilling the needs of the domestic market demand for zinc alloys. From setting up the new facility with investments in the latest equipment and world-class technologies, we aim to manufacture high-quality value-added zinc alloys products, which are currently being imported into the country. Currently, our value-added product share stands at approximately 30%. With this, we aim to take it to over 50%. With this, I hand over to Sandeep to update on the financial performance.

Thank you, Mr. Misra, and good afternoon, everyone. This was a great quarter where we crossed significant milestones and continued the positive momentum of our financial performance. We delivered historically high quarterly revenue and EBITDA as well as our highest ever net sales transition to underground mining. The winning district is underpinned by our relentless efforts on volume delivery, operational efficiencies, cost rationalization as well as the favorable LME environment. Being in the first quarter of the cost curve, our margin resilience even in the input commodity inflationary environment as positive correlation to LME prices creates a favorable trade-off for us. Coming to an update on the financial performance for the third quarter and 9 months ended December 21. The total revenue from operations during the quarter was INR 7,990 crores an increase of 32% Y-o-Y led by higher zinc volumes and higher zinc and lead LME prices as well as higher premium, which was partially offset by lower lead and silver volumes. Over the years, zinc and LME prices were up 28% and 23%, respectively. Sequentially, revenue increased 31%, primarily due to the higher metal and silver volume and zinc LME prices, partially offset by lower silver prices and WPP volumes. Sequentially, zinc and silver sales volume increased 29% and 14%, respectively, while lead sales volume remained flat. Zinc cost of production before royalty was $1,148 per metric ton for the quarter, it is marginally 2% higher sequentially and up 21% Y-o-Y. The COP for the 9 months ended December '21 was $1,116 per tonne, up 16% Y-o-Y. The COP has been affected by higher coal prices due to the increased use of imported coal, which is also at the higher cost owing to the [ lower in case ] coal availability. This was partially offset by higher volume, operational efficiencies and better recoveries. Coming to the EBITDA. EBITDA for the quarter was INR 4,392 crores, which is a 1/3 Y-o-Y up and 32% sequentially. EBITDA for the 9 months ended December '21 was at INR 11,282 crores, which is 43% Y-o-Y up. The rise was primarily due to the higher zinc volume, higher zinc and lead LME and silver prices as well as the higher premiums. Net profit for the quarter was INR 2,701 crores, which is up 23% Y-o-Y and 34% sequentially. 9 months net profit stood at INR 6,701 crores, which is 22% Y-o-Y up. Effective tax rate for the quarter was approximately 30% and for 9 months was 31%. This is the projection of our ETR guidance for the year, the full year remains unchanged at 32%, approximately. I'm also happy to state and record that in December '21, the Board had approved an interim dividend of INR 18 per equity share, which is 900% basis face value of INR 2 per share and amounts to INR 7,606 crores. This reinforces our commitment to our stated dividend policy as well as our superior stakeholder returns. With this, I open the floor for your questions.

[Operator Instructions] The first question is from the line of Abhiram Iyer from Deutsche CIB Centre Private Limited.

Congratulations for a very solid set of numbers. I have 2 questions. The first one was, could you give us a sense of whether debt has reduced from the end of September quarter? Because as I can see, the cash and equivalents have reduced, but that's pretty much the amount of the dividends that have been paid. So I was wondering whether debt or working capital has had an impact on the cash flow that's actually been generated from operations? That was the first question. And the second question is, you were looking at certain inorganic sort of acquisitions, some of these were did pertain to Zinc International your sister company. So could you give us any update on that? Is this still in committee in terms of discussion?

So if I may address the second question first, that our strategy of expanding beyond the boundaries of India remains intact. Of course, we are looking at South Africa and Zinc International and if alternative properties come up for discussion on that. However, whenever they are approved by the Board, we'll be able to report that. As of now, they are under active consideration by all Board members and as well as the stakeholders of the company.

Abhiram, coming to your first question, the debt reduction. Yes, you are right. We have reduced our debt by INR 17,050 crores, which was primary CP and the term loan during this quarter.

Next question is from the line of Pinakin Parekh from JPMorgan.

Sure. I have one question. There has been a subsidiary which has been created, I think Hindustan Zinc Alloys Limited. Can you give us more sense of what business this would involve in?

So this would -- yes, thank you for that question. So as the name suggests, this actually gives us the facility of concentrating all the alloy making operations under one group, who would develop expertise in delivering the alloy products, which currently various users in India are importing. It helps in 2 ways. One, it expands on our domestic market. Second is also does import substitution as far as zinc coming into the country through the alloy route is concerned. This facility will be put up in one of our operating locations, with all environment-friendly technology. But the focus remains on developing alloys, which will expand our business and also give us better premiums going forward.

Sir, can you give us a sense of, what kind of investments this will involve over the next 1 to 3 years?

So as of now, we have kept INR 200 crores. So we have kept INR 200 crores for this. We will start with the capacity matching with our market study. And as the market grows, we will then take it forward.

Next question is from the line of Amit Dixit from Edelweiss.

Yes. Congratulations for a good set of numbers. I have 2 questions. The first one is on the coal sourcing currently. So how much are we getting from linkage and how much we are importing? And given the current international coal prices, what kind of power and fuel costs change you expect in Q4 over Q3?

Sandeep, if you have to continue?

Yes. In terms of coal mix, we are supposed to have 25% linkage coal at 75%. I think there is some noise coming from there -- 25% to 75%.

Sorry to interrupt sir. Mr. Dixit, if you please maybe mute your connection while not speaking you could [indiscernible]. Sorry for that, sir. Please continue.

Roughly, the linkage coal consumption mix remain 25% to 30%. However, due to the non-power sector is not getting privatization by the Coal India currently, in the Q3, it was 3% to 4% of the linkage coal consumption mix. So this has put pressure on our coal cost and ultimately with the power cost and overall cost, which is roughly overall put together is a $50 to $55. However, in terms of the coal security, we are fully secured in terms of the import coal parcel. So no worry on that part. That is the -- I think, I hope I am able to answer your question.

So you mean that out of -- I mean, of 25% to 30% normal linkage, it was just 3% to 4% linkage in Q3?

Yes. Q3, it was 2% to 3% to 4%.

Okay. The second question is essentially the transfer to retained earnings of around INR 10,000-odd crores. So while you have indicated that it would be like as the Board be inflated can be utilized for the shareholder return. So I mean, is it fair to assume the second tranche of dividend, if any, I mean in the -- in this financial year?

So I would just simply say this is a standard combination which was amended in '12-'13. We have just followed the same practice and move this to free reserve under retained earning. This will essentially move the amount from [ ZR to RE ] as it generally said does not exist in the company back '13. I would not read too much into it and neither would we commit on any dividend-related announcements as they are solely more related decision. This is simply an enabling act. Fee reserve as the name suggests are not bound by any end use, since there is a more progressive act. Hence, we are also transitioning as the best practice. This essentially give us more headrooms.

[Operator Instructions] The next question is from the line of Sumangal Nevatia from Kotak Securities.

My first question is on the annual volumes. So are we on track to reach 1,025 to 1,050 Kt volumes, which we had guided in the previous quarter and 720 for silver? And also, if you could share why -- I mean, why we have missed or not declared the outlook in the commentary. It was a regular practice, but this quarter, I think we have discontinued it.

So no, they're not every quarter, roughly about -- we expect to do it twice in a year. And if we look at the current performance, in 9 months, we are up 7% as far as ore production compared to last year same 9 months as well as 6% up on -- compared to mined metal production. We hope that the run that quarter 4 normally Hindustan Zinc enjoys, we will be crossing the 1 million tonne mark. However, close to the guidance that we had issued previously, we can go, it depends upon how much we perform in this quarter.

Okay. And then on the cost of production, if you can just share what would be the impact of the current cost inflation on the commodity side. In previous guidance, it was around $1,075, south of $1,075. I guess that needs to be -- that has to be revised again. So if you can just share some cost detail also?

Yes, Sumangal. Thanks for asking the question. You would appreciate that we are in a super commodity cycle. The thing that we need to prioritize at all time is to sustain the first quarter of global cost curve. We are not throwing question to the winds and the remain cognizant of the risk posed by the coal prices, and I've spoken about the coal, linkage coal availability and import prices, which is globally being expected. So we will continue to focus on delivering volume, keeping a tight watch on the cost rationalization and operational efficiencies. I will also give a jump that way in the Q3 to Q2, we had a cost increase of marginally $24. But if you see the margins which have increased, it's almost $350, which is ultimately translating to my bottom right of INR 400 crores. So even if we consider a scenario where coal prices remain high and linkage coal availability become a concern, that will only impact cost marginally, which we would continue to offset with higher volume and operating efficiencies.

Understand. If I may just ask one more on the CapEx. We are talking about a $1 billion expenditure in ESG over the next three years. And then there will be a regular maintenance CapEx and also expansion CapEx from $1.2 million to eventually $1.5 billion. And in between, we were evaluating Gujarat, the smelter expansion in Gujarat also. So how should we look at overall CapEx on an annual basis over the next, say, 2 to 3 years if you could just share?

So this $1 billion expand the expenditure on the ESG front, I spoke about is not exclusive of regular maintenance or regular growth only part of those made like in maintenance. In the sustenance CapEx, we buy equipment under replacement category. So wherever I am buying replacement, I should look forward to ESG compliant or something like battery-operated vehicle. So those kind of expenditures, we will do, which will take us in our journey of net zero 2050. So that this $1 billion will comprise of some of the routine expenses for maintenance as well as part of the growth expenses wherever I do. So if I have -- like I spoke about in Dariba, we are in a power purchase agreement situation for supplying 300-megawatt of renewal power. Similarly, any new facilities that we put up all the time technologically looking at and that new facility we made, green products come from day 1, like the melting, casting unit that will come up, our target will be the value-added product that we will produce with the green product, meaning it is produced by consuming green energy only. So those are the kind of investments summed up together, we have kept aside $1 billion.

Sir, any guidance on the annual CapEx run rate for next 2, 3 years?

I think for this year, the CapEx guidance remain unchanged. So that's the -- for this year. We will come up with the in the new year above the CapEx guidance for the next year, '23.

Next question is from the line of Vishal Chandak from Motilal Oswal Financial Securities Limited.

Sir, on a strategic note, just wanted to understand one thing. Zinc prices are at northwards of $3,300 and [indiscernible] says whenever the cycle is in an uptrend, any acquisition done especially of the mine, et cetera, leads to kind of an impairment when the cycle turns down? At the peak of the cycle, we are considering acquisition of Zinc International assets. So how far do you think this would be a prudent acquisition?

So I don't think we have come out with a clear decision on acquisition. All I have said is it is under consideration. But when it will certify, when it will be executed, the same matter that will be decided by the Board on the timing, the extent, how do it. So all that, it's a matter of thing that the Board will come up with. As of now is purely in the consideration in the form of planning business case, does it help in the long run? But I take your point that timing will depend upon at the right time of entry, we will do that.

That's nice to hear sir. Sir, my second question was with respect to the target of 1.2 and then subsequently reaching to 1.3 million tonnes. Where are we with that respect?

So 1.2 million, the run rate in quarter 3, if you look at the metal produced of 260 kilotonnes, we are almost up of 1 million tonnes, and in quarter 3, we are targeting to exit at the rate of 1.2 million tonnes, and the number of equipment that has been brought in as replacement as well as addition for this year and next year. And so next year, we should be able to achieve the committed goal of 1.2 million tonnes. And then we are also investing in studies and representing technical designs for going up to 1.35 million tonnes. As we stand today, we already have the approval from the Board to move forward on those studies, and that will help us to propose schemes to the Board for approval, maybe sometime between July or August of next -- this year. Then we will see next year, I think some of those CapEx growth projects beginning.

Next question is from the line of Kunal Kothari from Centrum.

Sir, my question is, you have mentioned that we have aimed to increase the VAP value-added production share from 20% to 50%. So what will be the time line and process behind it and it will improve the overall profitability for the company?

So as of now, we should be finishing this year anywhere close to about 21% to -- 20% to 21% on the value-added product. If I look at realistically with the new facility coming in next year, we should be between 30% to 35%. And then year next, we should target 50%, depending upon our ability to produce of the quality that the market needs and also various customer approvals that we need to get.

Mr. Kothari, we can't hear you.

Sir, can you throw some light on how it will improve the profitability through this?

So generally, if I look at the premium of various value-added products over the -- our routine product of VAP, it varies between $5 per tonne to $50 per tonne. So it is only the product mix and customer approval that will determine. I won't try to put a big number there as of now, but I'm very hopeful that. One, it will increase our share of domestic market. Second, it will also increase the VAP percentage. So it is very obvious that it will surely increase in better MCX. Now depending on the prevailing LME prices, whether it will translate into EBITDA over and above current year or not is a factor of both LME as well as MCX. So I'm not going to do a guessing work there.

Sir, will it help to dealing through the like, fluctuation in the LME prices? Can we take this as a possibility?

Yes, [ it's -- all the products which are at the high premium segment and ] which are not purely guided by the LME, there will be some amount of absorption of the fluctuation into the premium that we take. But again, this market is set and the application of zinc, whether it is in alloy or it is in coating products, it only constitutes a very small percentage of the total product cost. So accordingly, the LME deviation, how much it will absorb? I'm not going to put a number there. But surely, it will give us some market, which is not from the LME but more from commodity demands and supply perspective since the application area is different, at least the steady demand will be there. So not that if it's a coated product, whether the auto sector does well or not, that determines the market for galvanizing zinc, whereas in case of I say, [ SK Tier 3 ] which is most into furnishings and fittings offer a high-value retail houses, then it is not impacted by whether a particular sector is doing well. So our belief is that those sectors, the demand will be more sustainable, irrespective of the commodity price fluctuation. So that will give us a steady volume to produce and supply to market.

Next question is from the line of Pallav Agarwal from Antique Stockbroking.

Sir, I had a question on the other expenses. So this quarter, we've seen an increase in this is now royalty and power and fuel are separate expenditure items. So any particular reason for the increase in this quarter in other expenses?

So royalty has increased on account of the higher mined metal production as well as the higher LME. And what was your other thing?

So, sir, I'm saying, sir, this doesn't include royalty and power and fuel. So this is must be some other -- some other head has increased?

Okay. So sequentially, if you see, it is a function of the volume as well. If you see our volume has also increased more than 25% sequentially. So this is on account of largely pertaining to the volume and our higher mine development because it has also happened during the quarter.

Okay, sir. Sir, also I just wanted to get a better sense of the mined metal -- refined metal capacity. So in between for lead, although I think our capacity is about 200,000 tonnes annually. We have been operated at close to -- produced even close to 60,000 tonnes per quarter in the past. So what can be -- what is our current capacity in terms of zinc and lead in refining space?

So it is, again, any smelting capacity or even you take steel plant capacities are a factor of what is the product mix they want to produce. Now the lead price is remaining almost flat whereas zinc prices surging upwards from, it provokes us to produce more zinc metal within the same capacity. And that actually allowed us to run the Pyro in the lead plus zinc mode. Hence, if you look at compared to last year, when it was mostly on late only mode operation, that means in Pyro, we are not producing anything. But this year in the Pyro, we are producing zinc. So to that extent, yes, 60 Kt per quarter production, if I run only in lead mode. If I don't run only lead mode, then will produce less. But overall, I have to maximize revenue as well as EBITDA. So that has been the deciding factor on the capacity. I don't take capacity of the plant as a fixed category, it depends upon what products they will produce and accordingly decide what capacity I will utilize.

Sir, so can we take a total zinc lead capacity, will that be a better figure would take probably a 1 million tonne per annum combined zinc lead in capacity?

If I give you the right figure, it can vary from 1.02 million tonnes per annum to 1.123 million tonnes per annum, depending upon what are the products I'm making. To give you an example, along with SHG if I make PW Zinc then I produce more zinc, but my customer may not remunerate me as much in PW Zinc if I rather produce lesser amount of zinc and try to produce more of value-added product. So it's a call that I have to take. Similarly, if I have more lead ore with higher silver PPL, I may decide to run more on lead-only mode in Pyro, so that I produce more lead and I produce more silver along with that, which may compensate for the earnings that I use by producing lead zinc. So that's a dynamic thing, I guess, from month-to-month, we may change the strategy. And depending on that, the whole capacity can go anywhere between 1.02 million tonnes to 1.13 million tonnes depending upon how I look at it.

Next question is from the line of Bhavin Chheda from Enam Holdings.

My question was on, I missed out it, against your linkage coal, how much coal you actually received from Coal India for this quarter and for cumulative 9 months, because any shortage normally they give it afterwards when their volume ramps up, right? So what's the balance quantity to be receivable in future from Coal India on the linkage shortage part?

Yes. So normally, we call it a backlog. So our backlog has been more than 200 rakes at this point of time. This quarter, we received almost 22,000 tonnes of coal from the Coal India.

Sir, you're saying 200 rakes, each rake is roughly INR 4,000, right?

Yes, I will say INR 4,000, then it will be almost 1 million tonnes.

So 1 million tonne is pending to be received?

Yes.

And you said, I think, as against your linkage of 25% to 30%, you received only 3% odd this quarter, right?

Yes.

So despite that, your cost escalation was on quarter-on-quarter basis was less than $25 per tonne, it's mainly operating leverage?

So here, you have to see and appreciate the company, the way it has structurally reduced the cost and taken a lot of cost reduction program internally. So you are right, you rightly cut off that actually $50 to $55 cost has increased on account of because of this lower increase coal and higher import coal, but we were able to offset the $30 on a account of the higher volume with the operating efficiency and a better [indiscernible] sale. So this is the overall story for the cost containment. And that is why we are in the first quarter of the global cost curve.

So in terms of, sir, power and fuel cost, this was the peak quarter because you will keep receiving this backlog, so your linkage coal percentage, this would be lowest ever in the quarter, right? You will at least receive much more than 3% of linkage coal what you have received in December quarter?

Now that is exactly -- exactly that is also our hope in quarter 4 more linkage coal we will receive. But again, it depends upon Coal India's ability to keep the same production or increase the production, which I expect they will do looking at this being a winter season and normally a good month for coal mines to operate. And at the same time, the demand in the other sectors, which prompted government power plants to keep on running and producing how that behave. On that, the surplus coal will be available for us and also the rake availability. Typically, in winter season, the rakes do get diverted for various crop movements as well across India. So keep our finger crossed, we hope that our linkage coal percentage comes back to at least 20% in the third and the fourth quarter, which should give us better results, but that's only a hope that we can have.

And sir, last one, to meet the earlier guidance on the mined metal volume, you need over 300,000 lakh tonnes of mined metal run rate in quarter 4, you're confident of doing that?

Yes. Of course, in mined metals, typically, if you look at last year, if we are talking in the month of March it was 100,000 tonnes we have produced. We hope that we should be able to maintain that spirit in the quarter 4. It all depends upon how we actually perform under the situation. And as of now, our confidence is there, absolutely that we should be exiting at rate of 1.2 million tonnes what we had thought earlier and the annual production should come to 1 million tonne plus.

Next question is from the line of Shreyans Daga from Barclays.

So my questions are more along the lines of dividends. So that you would not be able to guide for any full year dividends for FY '22?

So. No, dividend is a matter of Board's consideration. I think whenever they're decided, we will do inform. I don't think we can guide on dividend as such in the -- in the forward-looking.

Okay. And how is Q4 looking right now? So could you guide us to some earnings for Q4. Is Q3 a good run rate for Q4?

So we are not issuing any sales guidance for Q4. However, as we have discussed during all the answers that we have given until now, mined metal, we should be touching 1 million tonne plus. And costs, whatever is the current situation, we will keep managing as much as possible and hope that some respectable number we produce at the end of the year.

Okay, I see. And just one last question. So with regards to Government of India's selling stake in Hindustan Zinc. So do you have any updates on that?

No, the update is they are already been permitted by Supreme Court, and government has to come out with the mechanism. So I'm sure that government is working on the mechanism how the disinvestment will occur and whenever they are announced, we will be participating, I guess, I'm sure government is working on it.

Okay. Do you have any communication as to any time lines on that?

Looking at the [ past procedure ], I don't think government keeps communicating to the prospective buyer regarding how they are progressing, right?

Thank you very much. Participants, due to time constraint, that was the last question. I now hand the conference over to Ms. Shweta Arora for closing comments. Over to you, ma'am.

Thank you, everyone. With this, we close today's earnings call. For any follow-up questions or clarification on the results, please feel free to reach out to our Investor Relations team. Thank you.

Thank you very much.

Thank you. Thank you, all.

Ladies and gentlemen, on behalf of Hindustan Zinc Limited, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.