Aiming at an enterprise value of $50 billion, the management of Hindustan Zinc Ltd (HZL) is drawing up a plan to foray into international mining via acquisitions. Arun Misra, Chief Executive Officer, HZL, has said that the company wants to build mining assets mainly in the stretch between South Africa and Europe. The stretch between India and South Korea is another area of interest.
HZL is an India-centric miner of zinc, lead and silver. The company came into the fold of Vedanta group — controlled by billionaire Anil Agarwal — after the disinvestment of the government’s stake in 2002-03. Vedanta holds around 65% stake in the company now. The government is considering divesting its remaining 29.5% stake. Agarwal has already shown his interest in acquiring the stake.
Misra targets an enterprise valuation of $50 billion for HZL. The company is valued at $18 billion on the stock market now. “HZL has about ₹25,000 crore cash reserves on books and the resources are limited in India. Considering the huge cash reserve and ample opportunities outside, it is better to go for acquisitions to build a sizeable global portfolio,” says Misra. Since the steel consumption is high in Europe, there is huge demand for zinc for the galvanisation of steel. HZL sees it as an opportunity to launch its business there. However, Misra didn’t divulge any details on the acquisitions that they have been considering.
“We are planning to double the production from Zawar mines in Udaipur to 8 MT. The production from Rajpura Dariba mine will increase to 4MT from 1.5 MT. The mine expansion will require ₹3,000- 4,000 crore,” said Misra.
The miner is also looking to replace all the diesel-based equipment to battery-operated equipment at the mines as part of its initiatives to turn its mining operations environment-friendly. The world’s second-largest miner of zinc, lead and silver, plans to invest $1 billion in the next five years for turning the mining process green.
HZL aspires to be the third-largest silver producer in the world by increasing its production to 1,000 tonne a year from 700 tonne. In India, about 60% of the silver produced goes to jewellery-making, while in the developed world, 70% of the production is used for industrial purposes. It goes into cell phones, solar panels and circuit boards. The company will tap into the upcoming opportunities.
HZL is also planning to cut the thermal power usage by 50% and replace it with renewable energy. The company generates about 600 megawatt (MW) of power for its captive usage. “We are looking at building a portfolio of hybrid renewable energy — a combination of wind and solar — to achieve the 50% target in two-three years. The long-term goal is to cut down thermal power production by 90% with the emergence of better power storage solutions,” Misra adds.
The company is interested in the mining of gold, platinum, thorium and uranium as well. If the government eases its control, the company will be interested in investing in the segments, he says. The fertiliser business of HZL is not a business expansion, he adds. “It is a logical extension of our business to support the farming community in the country."