Latest news with #HZL
Mint
7 hours ago
- Business
- Mint
Vedanta Group promoters siphoning profits via exclusive HZL supply deal: Viceroy
American short-seller Viceroy Research on Wednesday said that the promoters of the Vedanta Group were 'siphoning margins' from listed group company Hindustan Zinc Ltd (HZL) by supplying commodity goods to it at inflated prices on an exclusive basis. It alleged that Minova Runaya Pvt. Ltd (MRPL), a 49% promoter-owned entity, has an exclusive contract with HZL for the supply of products including resin capsules, rock bolting systems and wire mesh. Used in mining, these products are typically commoditized and low-margin, but MRPL was selling them at a 30% mark-up to HZL, the short-seller alleged, adding the company does little manufacturing itself. HZL was MRPL's only customer, Viceroy added. 'This company (MRPL) has only one purpose, to buy commoditized products, slap a 30% markup on them, and then sell them to a captured HZL,' the short-seller said in its note, adding that there was 'more to come.' Between FY21 and FY24, Minova Runaya made an aggregate revenue of ₹ 553 crore with a profit of ₹ 92 crore, the short-seller disclosed citing the company's regulatory filings. Vedanta has denied all allegations. 'The said short sellers have consistently shared extremely ill-informed 'reports' with misleading information,' a Hindustan Zinc spokesperson said. The latest allegations disregard the 'stringent' governance protocols followed by Hindustan Zinc, the spokesperson said. Earlier, former Chief Justice of India D.Y. Chandrachud said in a legal opinion to Vedanta that Viceroy's report lacked credibility and is based on dubious credentials. He further said the report contains serious, reputationally damaging allegations. Shares of Vedanta and HZL had fallen following the publication of Viceroy's first report on 9 July, but have since recovered and not reacted to its subsequent eight reports. Hindustan Zinc's shares gained 0.82% to close at ₹ 446.9 on the BSE on Wednesday. Vedanta Ltd's shares settled 1.12% higher at ₹ 455.6. The benchmark Sensex closed 0.66% higher. Viceroy Research has a short position of undisclosed size on the debt of London-based group holding company Vedanta Resources. While the Vedanta Group holds a 49% stake in MRPL, the remaining 51% stake in the company is held by Minova Minetek, which is a Hyderabad-based manufacturer of mining, quarrying and construction equipment, as per private company data platform Tracxn. 'MRPL has a long-term sales contract with HZL, which provides it with strong revenue visibility,' Crisil Ratings noted in November 2024, when it rated HZL's long-term debt as A- with a stable outlook. 'As per the contract, HZL must procure its entire ground support product requirement from MRPL. This ensures healthy utilisation for the manufacturing capacities of MRPL,' the rating agency had noted. MRPL was onboarded by Hindustan Zinc as a reliable supplier for ground support after undergoing due screening processes and approvals from the Audit Committee and Board, as per the company spokesperson. The company has developed solutions that meet the unique specifications and standards of Hindustan Zinc's underground mines, they said. Transactions with MRPL were supported by benchmarking by independent firms, they said. Regarding the lack of MRPL's manufacturing capabilities, Viceroy noted that the company's accounts acknowledge that it manufactured nothing until at least FY24. "Even then, the only product it manufactured was wire mesh, a product so simple and cheap that a fully automated line can be set up for under ₹ 1 crore,' the short-seller said. Viceroy also pointed to some discrepancies in the financial statements of MRPL. For instance, income from HZL accounted for 114% of MRPL's revenue in FY24. The same year, MRPL declared ₹ 216 crore of tangible asset sales while only carrying ₹ 66 crore of tangible assets on its balance sheet. These discrepancies were persistently observed in preceding years too.
Indian Express
7 hours ago
- Business
- Indian Express
Hindustan Zinc pays out as dividend more than it earns, alleges US research firm Viceroy
US-based Viceroy Research has alleged that Hindustan Zinc Ltd (HZL), belonging to the Vedanta group led by Anil Agarwal, has paid out far more in dividends than it earned, purportedly borrowing to make up the shortfall. The research house has estimated a shortfall in free cash flow (FCF) of HZL — once a public sector firm — in the first quarter ended June 2025 to be around Rs 3,600 crore ($371m). 'HZL CFO Sandeep Modi's 'Rs 10,000 crore ($1.17b) free cash flow' claim collapses under scrutiny. Cash flows are subsidized by debt. If HZL's dividend remains the same as last year, we estimate HZL will incur an annual FCF shortfall of at least Rs 5,000 crore ($580m) and must be funded by more debt,' it said. When contacted, HZL spokesperson said. 'the Viceroy report is a combination of selective misinformation and baseless allegations. All resolutions are detailed and part of Board undertakings which are taken to them after rigorous due diligence. In the past 20 years the company's zinc production capacity has grown more than 4 times and silver by 20 times.' 'Hindustan Zinc is steered through a stringent governance framework wherein all matters are taken to the Board and this process is followed for all proposals,' HZL said. Viceroy alleged that HZL has not generated Rs 10,000 crore in FCF since 2023, at which point FCF has fallen sequentially. On an annualized run rate: we expect HZL FCF at Rs 7,000 crore. In FY 23, during a short commodities rally post covid, HZL generated Rs 12,000 crore FCF, and paid Rs 31,000 crore in dividends, accruing an enormous deficit. Leverage increased sharply vs Q1 2024, with the debt-equity ratio rising from 0.8x to 1.2x. FCF represents the amount of cash a business generates after accounting for capital expenditures needed to maintain or expand its asset base. In simpler terms, it's the cash left over after a company pays for its operating expenses and investments in equipment, property, or other assets. Vedanta acquired HZL from the government in 2002. Disclosures suggest HZL incurred Rs 2,000 crore ($232m) of new debt in the June quarter of FY26. HZL's auditor, SR Batliboi, failed to investigate material concerns, relying entirely on management assertions while the company's capital base deteriorated and governance collapsed, Viceroy alleged. HZL spokesperson said it has become the world's largest integrated zinc producer and is amongst the top 5 primary silver producers. 'It has created immense stakeholder value through increase in market cap by more than 500 times, in addition to dividends to shareholders and exchequer contribution. HZL contributes nearly 35 percent of the declared dividend to the government treasury, including dividend to government and tax deducted at source (TDS),' he said. According to HZL, this quarter amidst commodity headwinds the company delivered beyond market expectations and registered record high first quarter mined metal production and lowest cost of production. In FY25, the company clocked its second-best profit, up 33% YoY. Hindustan Zinc's bank facilities and debt programmes are Crisil AAA rated highlighting our efficient & integrated operations, and strong financial risk profile. And this consistent performance reflects the growing trust of our stakeholders, HZL said. The research firm also questioned the brand fees paid out by HZL. In the earnings call, HZL's CEO Arun Misra 'credited offshore brand fees (paid in advance) as justifiable by past 'risks' undertaken by Vedanta as a shareholder of HZL. This is preposterous,' the research firm said. 'HZL CEO Arun Misra's defense of the controversial 3 per cent brand fee, a fee that results in hundreds of crores in annual payments to VRL (Vedanta Resources), was the centrepiece of his narrative during the Q1FY26 Earnings Call,' the US firm said. 'We reiterate our belief that this 'brand fee' is an uncommercial contract with VEDL (Vedanta Ltd), who does not appear to provide any brand, management, or other auxiliary services to HZL. There are no employees or substantial operations at VRL to justify brand fee payments,' Viceroy said. 'Vedanta's shares in HZL bear the same risk as every other equity holder, including the government of India. If anything, it is the non-promoter shareholders that have borne the outsized risk of HZL taking outsized loans to bail out promoters,' it alleged. HZL said 'Vedanta' is a prominent global brand in the natural resources sector and the brand is a registered intellectual property of Vedanta Resources. 'HZL and other group companies use the brand under a brand license/sub-license agreement and pay a Board-approved brand and strategic services fee for its usage. This structure reflects a standard intercompany licensing model used globally by diversified groups and is fully compliant with Indian accounting, tax and governance regulations, and follows internationally accepted practices,' HZL spokesperson said.
Time of India
5 days ago
- Business
- Time of India
Hindustan Zinc posts net profit of 2,234cr in Q1
Udaipur: Vedanta group firm Hindustan Zinc Ltd (HZL) on Friday reported 4.7% decline in consolidated net profit at Rs 2,234 crore for the quarter ended June 30, 2025 on account of decline in revenue. The company had posted a net profit of Rs 2,345 crore in the year-ago period, HZL said in a filing to BSE. Revenue during the first quarter of FY26 dropped to Rs 7,591 crore from Rs 7,893 crore in the year-ago period. In a statement, HZL said the decline in revenue was due to reduced volumes and decreased prices for zinc and lead commodities, although this was somewhat compensated by increased silver prices, a stronger dollar, and better by-product realisations. Total expenses during April-June FY26 dropped to Rs 5,065 crore over Rs 5,284 crore in the year-ago period, the filing said. "In line with the rising zinc demand projected by 2030, the board has approved the Phase-1 expansion project towards 2x growth, further strengthening our growth pipeline. "Coupled with the addition of blocks of critical minerals and rare earth elements, we are strategically poised to transform into a true multi-metal powerhouse, unlocking sustained value for all our stakeholders," HZL Chief Executive Officer Arun Misra said. On the project updates, the company said 160 kilo tonne per annum (KTPA) roaster at Debari, Rajasthan will be commissioned in the second quarter of the current financial year. The 510 KTPA fertiliser plant is under progress and is likely to be completed by first quarter of implementation of hot acid leaching technology for recovery of lead and silver from smelting waste at Dariba is likely to be completed by the fourth quarter of the current financial year.
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Business Standard
5 days ago
- Business
- Business Standard
Hindustan Zinc CEO rejects Viceroy's brand fee allegations against Vedanta
Viceroy argued that this arrangement not only undermines transparency but also places legal and financial risks on HZL New Delhi Hindustan Zinc Ltd (HZL) CEO Arun Misra on Friday dismissed allegations made by US-based short seller Viceroy, which claimed that Vedanta violated its brand fee agreement with the government. Misra stated that all decisions related to the brand fee were made following proper procedures and board approval. Viceroy, in a recent report, accused Vedanta of breaching its agreement with the government by collecting brand fees from HZL. Misra clarified that before any proposal reaches the board, it undergoes legal review and is shared in advance with the government of India and its nominee director. "We are very clear in our approach. We take matters to board after due consultation, legal vetting... we share (the proposals) with the government of India, nominee director before the board meeting. They have adequate time to go through (the proposals)," he told the news agency PTI. Misra added that it is the board's responsibility to approve or reject proposals and that the brand fee decision was made through this process. "We don't find any issue in that," he said. According to the latest shareholding data, the government holds a 27.92 per cent stake in HZL, while Vedanta owns 61.84 per cent. During the privatisation process, Vedanta acquired the stake in HZL from the government in 2002. Over the past few days, Viceroy has released a series of reports against Vedanta and its subsidiaries. One of the biggest claims involves HZL's ₹1,560 crore payment to Vedanta for 'brand and strategic services,' which Viceroy described as lacking commercial justification, despite oversight from government-nominated directors on the board. Viceroy's claims so far Viceroy argued that this arrangement not only undermines transparency but also places legal and financial risks on HZL. The report suggested the brand fee deal violated the original shareholder agreement signed during HZL's privatisation. Viceroy also claimed Vedanta failed to construct a smelter that was contractually required. According to its report, this could trigger a put/call option in the shareholder agreement, allowing the government to either force Vedanta to buy its 29.54 per cent stake in HZL at a 50 per cent premium, or require the government to buy Vedanta's 64.92 per cent stake at a 50 per cent discount posing a potential financial risk of up to $10.66 billion. In response, a Vedanta spokesperson said the shareholder agreement, signed between the government and Sterlite Opportunities and Ventures (now part of Vedanta), allowed the company to drop the Kapasan project within a year if it was not viable, based on an independent assessment. 'Following a thorough project evaluation, Hindustan Zinc opted for a more cost-effective brownfield expansion at Chanderiya, which was duly approved by the Board, including government-nominated directors. This was communicated to the Ministry of Mines in 2003 and again in 2005, and no concerns were raised. Since the acquisition, HZL's capacity has grown nearly 5-fold,' the spokesperson said.
Time of India
5 days ago
- Business
- Time of India
Hindustan Zinc Q1 FY26 net profit declines 4.7% to ₹2,234 crore
Hindustan Zinc Ltd (HZL), a Vedanta group company , on Friday reported a 4.7 per cent year-on-year decline in its consolidated net profit, which stood at ₹2,234 crore for the quarter ended June 30, 2025. This compares to a net profit of ₹2,345 crore in the corresponding period of the previous fiscal year (Q1 FY25), according to its filing with the BSE, PTI reports. The decline in profitability was primarily driven by a fall in revenue, which dropped to ₹7,591 crore in Q1 FY26 from ₹7,893 crore in the year-ago quarter. In an official statement, HZL attributed the revenue dip to reduced volumes and lower commodity prices for zinc and lead. However, these headwinds were partially offset by an increase in silver prices, a stronger US dollar, and improved realisations from by-products. Despite the top-line pressure, HZL demonstrated cost management, with total expenses for the April-June FY26 period decreasing to ₹5,065 crore from ₹5,284 crore in Q1 FY25. The company also achieved its lowest ever first-quarter zinc production cost since transitioning to underground mining, at $1,010 per tonne, a 9 per cent improvement year-on-year. 'In line with the rising zinc demand projected by 2030, the board has approved the Phase-1 expansion project towards 2x growth, further strengthening our growth pipeline," said Arun Misra, HZL Chief Executive Officer. He added that with the recent addition of critical mineral and rare earth element blocks, HZL is strategically poised to transform into a true multi-metal powerhouse, unlocking sustained value for all our stakeholders. Amongst the company's key projects, a 160 kilo tonne per annum (KTPA) roaster at Debari, Rajasthan, is scheduled for commissioning in the second quarter of the current financial year (Q2 FY26), while the 510 KTPA fertiliser plant project is progressing as planned is expected to be completed by the first quarter of FY27, the company said in its statement.
