Hindustan Zinc — Q1 FY26 earnings call

Call held 18 Jul 2025

Management summary

Hindustan Zinc delivered a strong operational performance in Q1 FY26, achieving record mine metal production and the lowest cost of production since underground transition. Despite softer zinc and lead prices, the company maintained a robust EBITDA margin of ~50% and reported a PAT of ₹2,234 crores. Strategic capacity expansion projects are on track, and the company is diversifying into critical minerals, reinforcing its position as a low-cost producer with a focus on sustainable growth.

Highlights

  • Mine metal production reached a record 265,000 tons for Q1 FY26.

  • Cost of production (COP) for zinc was $1,010 per ton, the lowest Q1 figure since underground transition, representing a 9% YoY improvement.

  • EBITDA margin remained strong at approximately 50%, reflecting operational efficiencies.

  • Silver prices showed robust performance, surging 17% YoY to over $37 per troy ounce.

  • The company achieved 3.32x water positive status and launched ambitious 'Sustainability Goals 2030'.

Concerns

  • Zinc LME prices softened by 7% YoY to $2,764 per ton.

  • Lead LME prices softened by 10% YoY to $2,025 per ton.

  • Refined metal production stood at 250,000 tons, impacted by ongoing maintenance activities.

  • Q1 salable silver production was 149 metric tons, affected by lower overall metal production and a lower silver grade of 88 ppm in the SK Mine.

Key financials

  1. Revenue from Operations ₹7,771 Cr -4%YoY
  2. EBITDA ₹3,860 Cr -2%YoY
  3. EBITDA Margin 50%
  4. PAT ₹2,234 Cr -5%YoY
  5. Zinc Cost of Production 1,010 USD/ton -9%YoY
  6. Mined Metal Production 2,65,000 tons
  7. Refined Metal Production 2,50,000 tons
  8. Salable Silver Production 149 metric tons
  9. Zinc LME Price 2,764 USD/ton -7%YoY
  10. Lead LME Price 2,025 USD/ton -10%YoY
  11. Silver Price 37 USD/troy ounce +17%YoY

What they filed

Q1 FY27: revenue up 77.2%, net profit up 146.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue8,242 8,556 9,041 7,723 8,525 +3%10,922 +28%13,488 +49%13,687 +77%
EBITDA4,104 4,458 4,783 3,816 4,426 +8%6,005 +35%7,666 +60%7,994 +109%
Net profit2,298 2,647 2,976 2,204 2,632 +15%3,879 +47%4,997 +68%5,425 +146%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex Capex disclosed
    • 250 KTPA integrated metal capacity expansion with associated mining capabilities ₹12,000 Cr
    • Fertilizer plant (5 lakh ton capacity) ₹1,800 Cr
    As you already know, in June, our Board approved the initial phase of growth plan to double the capacity, where initially we will add 250,000 tons per annum integrated metal capacity with associated mining capabilities with a capital expenditure of around Rs. 12,000 crores... fertilizer total CAPEX cost is around Rs. 1,800 crores and around Rs. 1,000 crores has already been spent and the remaining will be spent in the next 9 months to get a complete 5 lakh ton of the fertilizer.
  • Debt Net ₹4,000 Cr
    Sir, first question is on the capital structure and balance sheet. Sir, our net debt is now almost Rs. 4,000 crores.
  • Dividend ₹10/share (interim)
    Further, the Company also paid Rs. 10 per share as the interim dividend, totaling the overall dividend payout during the quarter to Rs. 4,225 Cr.
  • M&A Potash, Rare Earth Element, Tungsten mineral blocks Acquisition · Announced

    Advancing vision to become a multi-metal enterprise and a leader in India's strategic mineral ecosystem, aligning with country's goal for critical mineral security.

    Early exploration stage, business case not yet ready.

    I am happy to share that we have secured LOI for all the three new critical mineral blocks, Potash in Rajasthan with 1,841 hectare block size, Rare Earth Element in Uttar Pradesh with 201 hectare block size, and Tungsten in Andhra Pradesh with 308 hectare block size... First, we have to do the exploration itself. There is not much of a data of a proven reserve there... So, we are not yet ready with the business case.
  • Liquidity Liquidity disclosed Free cash flow generation of around Rs. 45,000 to Rs. 50,000 crores over the next three to four years, with an estimated CAPEX of Rs. 32,000 to Rs. 35,000 crores over the next five years, leaving Rs. 18,000 crores available for distribution.
    Re-iterating from our last investor call with a pre-growth CAPEX-free cash flow generation of around Rs. 45,000 to Rs. 50,000 crores, and an estimated CAPEX of around Rs. 32,000 to Rs. 35,000 crores over the next five years, we are comfortably positioned to create long-term shareholder value... still you have availability of Rs. 18,000 crores, which can be distributed subject to the Board approval from the shareholder's reward point of view.

Guidance & targets

Production Volume

  • Full-year production guidance Production Volume · FY26 · High confidence As guided earlier
    And we will complete all our debottlenecking activities in smelter well before the scheduled timeline in Quarter 2, starting from August at Dariba, followed by Chanderiya. With these developments, we are confident in achieving the full-year guidance as guided earlier.

    — Arun Misra

Cost of Production

  • Zinc Cost of Production Cost of Production · FY26 · High confidence Lower end of full year guidance, advancing towards $1,000 per ton
    So, with the present cost performance, we are highly confident to achieve lower end of the guidance for the full year... Zinc COP is consistently advancing towards our desired target of 1,000 per ton, which we have set for ourselves.

    — Sandeep Modi

Capacity

  • Refined Metal Capacity Capacity · High confidence 1.38 million tons per annum
    The expansion will increase our refined metal capacity to 1.38 million tons per annum and our mining capability to 1.5 million tons per annum.

    — Arun Misra

  • Mining Capability Capacity · High confidence 1.5 million tons per annum

    — Arun Misra

Projects

  • Debari Roaster Commissioning Projects · mid of Quarter 2 · High confidence Commissioned
    commissioning activities for the new 160,000 tons per annum roaster at Debari have commenced and is expected to be commissioned by mid of Quarter 2.

    — Arun Misra

  • Smelter Debottlenecking Projects · Quarter 2 (starting August) · High confidence Completed
    And we will complete all our debottlenecking activities in smelter well before the scheduled timeline in Quarter 2, starting from August at Dariba, followed by Chanderiya.

    — Arun Misra

Financial Impact of Expansion

  • Revenue increase from 250 KTPA expansion Financial Impact of Expansion · next three to four years · High confidence ₹40,000 crores
    With the newly announced 250 KTPA integrated metal capacity expansion, revenue and EBITDA are projected to increase approximately Rs. 40,000 crores and Rs. 21,000 crores in the next three to four years, respectively.

    — Sandeep Modi

  • EBITDA increase from 250 KTPA expansion Financial Impact of Expansion · next three to four years · High confidence ₹21,000 crores

    — Sandeep Modi

Free Cash Flow

  • Free Cash Flow Generation Free Cash Flow · next five years · High confidence ₹45,000 to ₹50,000 crores
    Re-iterating from our last investor call with a pre-growth CAPEX-free cash flow generation of around Rs. 45,000 to Rs. 50,000 crores, and an estimated CAPEX of around Rs. 32,000 to Rs. 35,000 crores over the next five years

    — Sandeep Modi

Capex

  • Estimated CAPEX Capex · next five years · High confidence ₹32,000 to ₹35,000 crores
    Re-iterating from our last investor call with a pre-growth CAPEX-free cash flow generation of around Rs. 45,000 to Rs. 50,000 crores, and an estimated CAPEX of around Rs. 32,000 to Rs. 35,000 crores over the next five years

    — Sandeep Modi

Fertilizer Business

  • Fertilizer Plant EBITDA Fertilizer Business · High confidence ₹400-450 crores
    So, as we said in earlier in case of fertilizer, we are expecting around Rs. 400-450 crores of the EBITDA and around Rs. 2,000-2,500 crores of revenue.

    — Sandeep Modi

  • Fertilizer Plant Revenue Fertilizer Business · High confidence ₹2,000-2,500 crores

    — Sandeep Modi

  • Fertilizer Plant Ramp-up Fertilizer Business · High confidence Maximum 3 months
    No, no. The ramp up, why should it be 2 years? Maximum 3 months, we will have the ramp up.

    — Arun Misra

ESG

  • GHG Emissions ESG · by FY27 · Medium confidence Below 4.6, 4.5 level

    From 4.86 (Q1) today

    We should go down below 4.6, 4.5 level.

    — Arun Misra

  • Renewable Power Percentage ESG · by September · High confidence Increase

    From 19% (Q1) today

    as the Quarter 2, Quarter 3, Quarter 4 pans out, we will have one increase in percentage of renewable power by September. Almost all of the wind power will come into the place.

    — Arun Misra

Brand Fee

  • Brand Fee Percentage Brand Fee · till end of contact period (at least till FY28) · High confidence 3%

    Previously 2% → 3%

    Now it will remain at 3% till the end of the contact period... It is beyond next two fiscal years... at least till FY '28, it will remain at 3%.

    — Arun Misra

Mine Development

  • Bamnia Kalan Mine Opening Mine Development · 2026, end of 2027 early · Medium confidence Open
    we expect the mine to open somewhere in 2026, end of 2027 early.

    — Arun Misra

Expansion Ordering

  • Orders for 2-million-ton expansion Expansion Ordering · by September 30th · High confidence All orders placed
    Now in the second part, we should be placing all the orders for 2-million-ton expansion which should be placed by September 30th.

    — Arun Misra

What to watch in Q2 FY26

Debari Roaster Commissioning

mid of Quarter 2
Current Almost 99.9% construction over
Target Commissioned

Why it matters

Successful commissioning is crucial for increasing refined metal production capacity and achieving overall volume targets.

Debari is already almost 99.9% of the construction work is over and Quarter 2 is the time when we will see the commissioning.

Risks & concerns

  • Global macroeconomic uncertainties

    medium

    Global economies faced multiple uncertainties during the quarter, including rising U.S. tariffs, the Iran-Israel conflict and other macroeconomic challenges, with subdued production demand in China and Japan.

    Management acknowledged

  • Softening Zinc and Lead prices

    medium

    Zinc prices softened by 7% YoY to $2,764/ton and Lead by 10% YoY to $2,025/ton amid prevailing global headwinds.

    Management acknowledged

  • Lower silver grade impacting Q1 silver volumes

    low

    Q1 silver volumes were impacted by lower metal production and a lower silver grade of 88 ppm in the SK Mine compared to last year.

    Management acknowledged

Q&A highlights

6 direct, 2 evasive
Lower Silver Volumes & FY26 Guidance Direct
overall grade at Hindustan Zinc level is around 88 ppm, which is lower by about 5 to 10 points compared to what we had same time last year... Q3, Q4 will see much better numbers of silver and metal, which will compensate for the loss and help us to reach the guidance numbers.

Explains the Q1 miss on silver production due to lower metal grade and provides management's plan and confidence for achieving full-year guidance in later quarters.

Asked by Manav Gogia

Debari Roaster & Fertilizer Plant Delays Direct
Debari is already almost 99.9% of the construction work is over and Quarter 2 is the time when we will see the commissioning... fertilizer project is on, and we expect in the guided timeline, we will be doing the fertilizer project. We will try to bring in part of the project earlier.

Clarifies the near-completion status and commissioning timelines for critical expansion projects, addressing concerns about potential delays and indicating earlier revenue generation from the fertilizer plant.

Asked by Manav Gogia

Cost of Production (COP) Trajectory Direct
Yes, all directions are looking like that... renewable power mix will go up, volumes will go up, fixed costs will spread... North Star was $1,000 COP and looks like we are headed that way.

Reaffirms management's confidence in achieving the target COP of $1,000/ton, outlining the key drivers such as increased renewable energy and higher volumes.

Asked by Pallav Agarwal

Critical Mineral Blocks & Business Case Direct
First, we have to do the exploration itself. There is not much of a data of a proven reserve there... will have to do full exploration, establish the reserve, then look at the business case and all that. So, we are not yet ready with the business case.

Provides crucial context on the very early stage of the critical mineral projects, indicating that significant exploration and business case development are still required before financial viability can be assessed.

Asked by Amit Dixit

Royalty Increase & Impact on Profitability Evasive
we have seen the worst case and the most positive case... we are very confident with the worst kind of cases that we have planned in our mind, we will have a good amount of profitability, much better than all other metal businesses in India. That will give an indication to what price we will bid there, no? So, why should we?

Analysts are probing potential future cost increases from royalty revisions, but management, while confident in profitability, is unwilling to disclose specific worst-case numbers, likely due to competitive sensitivity.

Asked by Sumangal Nevatia

Brand Fee Increase and Duration Direct
Now it will remain at 3% till the end of the contact period... It is beyond next two fiscal years... at least till FY '28, it will remain at 3%.

Clarifies the new brand fee percentage (3%) and its guaranteed duration for the next few fiscal years, providing certainty on this significant cost item.

Asked by Ashish Kejriwal

Vedanta Stake Reduction & Brand Fee Justification Evasive
as Hindustan Zinc Management, we cannot comment on any one of the or many of the owners of the Company, their strategic moves and what they do... as long as management control is there, then as long as strategic directions are set, strategic services are provided, the brand fee also is there.

Analysts questioned the perceived contradiction of Vedanta reducing its stake while HZL pays a higher brand fee to Vedanta. Management avoided commenting on the parent's actions but linked the brand fee to ongoing management control and strategic services provided.

Asked by Ritesh Shah

Silver Sand & Gold Recovery Allegations Direct
No, no, we sell silver and residues of silver also we sell... we sell many of these smelter residues as it is based on the primary metal existence to people... roaster per se does not produce silver, but as long as if I have more capacity of leaching and purification circuit, then I will have more amount of silver being produced.

Addresses a specific market rumor about silver sand being converted to gold, clarifying the company's residue processing and silver recovery methods, dispelling potential misinformation.

Asked by Ritesh Shah

3 min read 6 chapters

Detailed narrative

Strong Operational Performance Amidst Price Headwinds

Hindustan Zinc delivered a robust Q1 FY26, achieving its highest-ever mine metal production of 265,000 tons. The company also recorded its lowest Q1 cost of production since underground transition at $1,010 per ton, marking a 9% year-on-year reduction. This efficiency was driven by improved metal grades, higher domestic coal utilization, increased renewable energy usage, and softened input commodity prices. Despite a 4% YoY decline in revenue to ₹7,771 crores due to softer zinc and lead prices (down 7% and 10% YoY respectively), the company maintained an industry-leading EBITDA margin of approximately 50%.

Strategic Capacity Expansion and Project Timelines

The company is actively pursuing its growth plan to double capacity, with an initial phase involving a ₹12,000 crore CAPEX to add 250,000 tons per annum integrated metal capacity. Key projects are on track, with the new 160,000 tons per annum roaster at Debari expected to be commissioned by mid-Q2 FY26, having reached 99.9% construction completion. Additionally, all smelter debottlenecking activities are scheduled for completion in Q2, starting from August, which is expected to support the achievement of full-year production guidance.

Diversification into Critical Minerals and Fertilizer Business

Hindustan Zinc has secured Letters of Intent (LOIs) for three critical mineral blocks: Potash in Rajasthan, Rare Earth Element in Uttar Pradesh, and Tungsten in Andhra Pradesh, marking a strategic entry into India's critical mineral ecosystem. The company's 0.5-million-ton fertilizer plant, with a total CAPEX of ₹1,800 crores (₹1,000 crores already spent), is projected to generate ₹400-450 crores in EBITDA and ₹2,000-2,500 crores in revenue. Management anticipates a rapid ramp-up within three months of commissioning, with efforts to bring the phosphoric acid plant online earlier to generate revenue.

ESG Initiatives and Cost Efficiency Drivers

The company demonstrated strong commitment to sustainability, achieving 3.32x water positive status and launching comprehensive 'Sustainability Goals 2030.' Renewable energy now accounts for 19% of the total power consumption, up from 13% in the last fiscal year, significantly contributing to cost reduction. Management expects greenhouse gas emissions to decrease below 4.6-4.5 level from Q1's 4.86, driven by the increasing share of renewable power and higher production volumes in subsequent quarters.

Financial Outlook and Capital Allocation

The 250 KTPA integrated metal capacity expansion is projected to increase revenue by approximately ₹40,000 crores and EBITDA by ₹21,000 crores over the next three to four years. Hindustan Zinc anticipates generating ₹45,000-50,000 crores in free cash flow over the next five years, with an estimated CAPEX of ₹32,000-35,000 crores during the same period. The company paid an interim dividend of ₹10 per share, totaling ₹4,225 crores, and reported a net debt of approximately ₹4,000 crores, with ₹18,000 crores available for distribution after planned CAPEX.

Silver Performance and Strategy

Despite a significant 17% year-on-year surge in silver prices to over $37 per troy ounce, Q1 salable silver production stood at 149 metric tons. This was primarily attributed to lower overall metal production and a reduced silver grade of 88 ppm in the SK Mine, which was 5-10 points lower than the previous year. Management confirmed prioritizing concentrates with the best silver content in Q1 and expects improved silver volumes in Q3 and Q4, supported by the commissioning of the new roaster and ongoing debottlenecking activities, to meet the full-year guidance.

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