Even post dividend see cash balance at around Rs 15,000 crore: Hindustan Zinc

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Hindustan Zinc has approved a mega special dividend of nearly Rs 14 lakh crore. It is the highest ever in a financial year in the whole of India’s corporate history.

Throwing more light on the matter, Sunil Duggal, CEO, Hindustan Zinc told CNBC-TV18 that the final decision on dividend will be taken on April 1.

The approval for dividend was taken with the thought of rewarding shareholders since there was a large pile of cash on the books, he added. Even post the dividend, the cash balance with the company would stand at Rs 15000 crore, which could be utilised to fund projects or investments if any.

He also clarified that there was no discussion yet on the divestment of the government’s stake.

Talking about production, he said, “We are ramping up and we are on right track to deliver 1.2 million tonne in FY19-20”.

Below is the transcript of the interview.

Q: 1,375 percent dividend announced by HZL and 95 percent in October. So this is the final one for the investors?

A: As of now I would say it is the final one but we will take a final decision in the month of April.

Q: A lot of investors as well as analysts believe that this is the precursor to government’s residual stake sale in HZL, could you elabourate on that?

A: This is just the guesswork that people are doing in the market. There is no discussion, which has taken place in the board. No agenda has been brought by any of the stakeholders.

So as of now, I do not think anything is going to happen in the time to come in the near future.

Q: If you look at the history, the dividend pay-out has increased from 2014 onwards and in the last financial year and this financial year we have seen the highest in terms of 1,200 percent and 1,375 percent, so how is the trend changing?

A: It is nothing like a trend changing. The company’s performance has become more robust in the last few years. So the balance sheet was becoming very healthy. The returns on the investment are okay. The cash was piling up so we decided at some point of time in a board that it will be worthwhile to deliver to the shareholders and reward them. So we rewarded them.

Even after paying this dividend of Rs 14,000 crore odd, you can see that the cash balance at the end of the year would be around Rs 15,000 crore. So the cash lying at a level of Rs 15,000 crore is enough to fund the projects going forward and take any other decision if we want to take — take a bold decision on any investment or diversification at that point of time. So, I think that was the decision which was taken by the board.

Q: This financial year 95 percent and yesterday the board decided 1,375 percent dividend for its shareholder but it is still a special dividend, can we expect more dividend for the current financial year since you spoke about Rs 15,000 crore cash balance?

A: I do not think for the current year any further dividend would be there but it is a board matter, which will be decided. As of now, there is no understanding that any further dividend would be given at the end of the year.

Q: Can investors expect 100 percent dividend pay-out in next one-three years?

A: It is a board matter. I am nobody because there is a lot of cash, which has been taken out from the balance sheet. Going forward, it all depends on what will be the performance of the company although the volumes are going up and you also see the prices — the way it is looking, healthy prices are looking and the rally may continue along with the volume and the silver volume. So it all depends on what happens, how the balance sheet will look like and what decision the board of directors will take at that point of time. I am nobody to comment at this point of time.

Q: Will the cash received by the parent company be utilised for the Anglo-American stake which has been acquired recently?

A: That is not my prerogative, better you ask the Vedanta guys.

Q: What is the outlook you see for zinc? Many analysts believe that in 2017-2018 it will peak the highest price, so how do you see the outlook on prices for zinc?

A: I am very bullish personally. How the turn of events have happened last year — around 0.8 to 1 million tonne of the deficit of concentrate which has happened has put a lot of pressure on the smelters and because of which the treatment charges have gone to the rock-bottom in the history of the zinc.

So it has put a lot of pressure on the smelters and they are not able to earn any profit along with that it also does not look like the mine supply will pick up in the time to come. I have heard that around 0.5 million tonne of capacity in China is shut down and that will put additional pressure on the supply side.

You must have also heard that last week in Peru, floods have come and because of the flood situation some smelters were shut down, some mines are also flooded. So I am not sure when the operation of some of these smelters or the mines or the railway track will resume but in the near-term maybe in the next three months time, it will further tighten up the supply side. So I expect both the prices and the premium should look up.

Q: What is the outlook for production for HZL?

A: We are ramping up and we are on right track and we will deliver 1.2 million tonne in FY19-20. Every year the volume is growing, the silver is growing at a much faster pace because of the contribution from the silver-rich mines is going every year, so next year there will be further growth in volumes.

Q: What could be the timeline for government’s residual stake sale? It is again on the agenda for the government on strategic sale for the next financial year? Have you heard anything from the government? Do you expect, are you positive that very soon the government will be able to sell its residual stake?

A: No communication has come from the government, no discussion has taken place in the board, no tickers have come, so I do not think in the near future anything is going to happen but it all depends on how the turn of events will happen and the discussion will take place.

Q: There was one proposal given by HZL on buyback of shares, which never got a nod from the government, will that proposal again come back in the new financial year?

A: You must have heard Mine secretary told at some point of time they are taking a legal opinion. The opinion couldn’t come and it was taking a little more time so in the meantime board of director thought that it is worthwhile at this point of time to disburse the dividend rather than waiting for that. So let us see what happens going forward.