Rating Rationale
October 24, 2018 | Mumbai
Hindustan Zinc Limited
Rated amount enhanced
Rating Action
Total Bank Loan Facilities Rated Rs.2450 Crore
Long Term Rating CRISIL AAA/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
Rs.5000 Crore Commercial Paper (Enhanced from Rs.2000 Crore)  CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its ratings on the bank facilities and commercial paper of Hindustan Zinc Limited (HZL) at 'CRISIL AAA/Stable/CRISIL A1+'. The ratings continue to reflect HZL's dominant position in India's zinc industry, efficient and integrated operations, and a strong financial risk profile. These strengths are partially offset by susceptibility to cyclicality in the galvanised steel sector.

Key Rating Drivers & Detailed Description
* Dominant market position in the zinc market in India: HZL has a mined metal capacity of around 1 mn tonne per annum (tpa) and smelter capacities of 843,000 tpa for zinc, 201,000 tpa for lead, and 600 tpa for silver. It is the second largest zinc-lead miner and fourth largest zinc-lead smelter globally. With a share of more than 75% by volume, it enjoys a dominant position in the domestic zinc market. High entry barriers, such as capital-intensive operations and non-availability of zinc ore mines, lend a significant edge to the business risk profile. The company should maintain its leading position in the zinc and lead segments in India over the medium term. Export presence in the global markets enhances revenue diversity; in fiscal 2018, exports contributed about 32% of the zinc-lead segment revenue.
* Integrated operations and high-grade reserves, leading to competitive cost position: HZL's cost of production ranks in the first quartile globally (zinc metal cost, excluding royalty, has been around USD 1039 per tonne for 6 months ended September 2018). The high operating efficiency is driven by significant backward integration and low-cost, high-grade zinc reserves. The integrated operations span the entire value chain, from mining of zinc and lead ore, to conversion to concentrates, smelting these to refined zinc and lead, and production of power through captive power plants. As on March 31, 2018, net reserves and resources were 411mt, ensuring a long mine life of more than 25 years. With access to the bulk of lead-zinc deposits in Rajasthan through long-term agreements with the Government of India (GoI), the company will remain a low-cost producer of zinc over the medium term. Transition to underground mining from open-cast mining was completed by end of fiscal 2018.  CRISIL further expects volumes to ramp up to 1.2 mtpa by FY20, on completion of its ongoing capital expenditure plan (capex).  Although moderation in both zinc prices and volumes resulted in slight decline in operating profits in H1 FY 2019, with EBITDA at Rs. 5,100 crore versus Rs. 5,456 crore in H1 FY 2018, ramp-up in volumes from underground mines in the second half of fiscal 2019 and in 2020 should support strong accruals.   
* Strong financial risk profile, driven by robust liquidity and a conservative capital structure: HZL's financial risk profile is marked by large networth, absence of debt and ample liquid surplus, with cash and cash equivalents of Rs. 23,304 crore as on September 30, 2018. Despite capital expenditure plan of about USD 400 million (About Rs 2900 crore) for FY 2019 and average of USD 150-200 million over the medium term coupled with high dividend pay-outs (interim dividend of Rs. 20 per share was declared on October 22, 2018 which will entail outflows of Rs. 10,188 crore including DDT), the financial metrics should remain strong, backed by healthy profitability.
* Exposure to the cyclical galvanised steel sector: The demand for zinc is closely linked to the galvanised steel industry, which consumes around 70% of the zinc produced in India. The steel industry depends on growth of end-user industries, such as automotives, consumer durables, batteries, home appliances, construction, and infrastructure. A downturn in any of these industries will result in reduced demand for galvanised steel, forcing HZL to increase export, which is less profitable.
Outlook: Stable

CRISIL believes HZL will maintain its favourable capital structure and strong liquidity over the medium term, driven by its leadership position in the domestic market, high cash flows from its core business, and efficient and integrated operations.
Downward Scenario
* Company contracts substantial debt to fund any inorganic growth or pay higher dividends.

About the Company

HZL was incorporated in 1966 as a public sector company. In fiscal 2003, GoI divested 26% of its equity in HZL to Sterlite Industries Ltd (Sterlite Industries), which later made an open offer for a further 20%. In fiscal 2004, Sterlite Industries acquired an additional 18.92% by exercising an option granted by GoI to increase the stake to 64.9%. After the restructuring of the Vedanta group in India, HZL became a 64.9% subsidiary of Vedanta Ltd (rated 'CRISIL AA/Positive/CRISIL A1+'). The Company is headquartered in Udaipur, Rajasthan in India and has zinc and lead mines at Rampura Agucha, Sindesar Khurd, Rajpura Dariba, Zawar and Kayad; primary smelter operations at Chanderiya, Dariba and Debari, all in the state of Rajasthan; and finished product facilities in the state of Uttarakhand.

In first six months of fiscal 2019, HZL reported revenue of Rs 10,087 crore and net profit of Rs 3,733 as against revenue of Rs 9,885 crore and net profit of Rs 4,473 crore for the corresponding period in the previous fiscal.

Key Financial Indicators
Particulars Unit 2018 2017
Revenue Rs. Cr. 22,521 18,798
Profit After Tax Rs. Cr. 9276 8,316
PAT Margins % 41.2% 44.2%
Adjusted Debt/Adjusted Net worth Times NA 0.26
Interest coverage Times 49.6 60.5

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size
(Rs Crore)
Rating Assigned
with Outlook
NA Commercial Paper NA NA 7-365 days 5000 CRISIL A1+
NA Fund-Based Facilities NA NA NA 450 CRISIL AAA/Stable
NA Letter of Credit NA NA NA 1000 CRISIL A1+
NA Bill Discounting NA NA NA 150 CRISIL AAA/Stable
NA Overdraft NA NA NA 650 CRISIL AAA/Stable
NA Proposed Working Capital Facility NA NA NA 200 CRISIL AAA/Stable
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  5000.00  CRISIL A1+  23-03-18  CRISIL A1+  15-09-17  CRISIL A1+  13-09-16  CRISIL A1+    --  -- 
        12-03-18  CRISIL A1+  28-04-17  CRISIL A1+  31-03-16  CRISIL A1+       
            21-03-17  CRISIL A1+  30-03-16  CRISIL A1+       
            28-02-17  CRISIL A1+           
Short Term Debt  ST    --    --  15-09-17  Withdrawal  13-09-16  CRISIL A1+  11-08-15  CRISIL A1+  CRISIL A1+ 
            28-04-17  CRISIL A1+  31-03-16  CRISIL A1+  06-08-15  CRISIL A1+   
            21-03-17  CRISIL A1+  30-03-16  CRISIL A1+  20-01-15  CRISIL A1+   
            28-02-17  CRISIL A1+  27-01-16  CRISIL A1+       
Fund-based Bank Facilities  LT/ST  1450.00  CRISIL AAA/Stable/ CRISIL A1+  23-03-18  CRISIL AAA/Stable/ CRISIL A1+  15-09-17  CRISIL AAA/Stable/ CRISIL A1+  13-09-16  CRISIL AAA/Stable/ CRISIL A1+  11-08-15  CRISIL AAA/Stable/ CRISIL A1+  CRISIL AAA/Stable/ CRISIL A1+ 
        12-03-18  CRISIL AAA/Stable/ CRISIL A1+  28-04-17  CRISIL AAA/Stable/ CRISIL A1+  31-03-16  CRISIL AAA/Stable/ CRISIL A1+  06-08-15  CRISIL AAA/Stable/ CRISIL A1+   
            21-03-17  CRISIL AAA/Stable/ CRISIL A1+  30-03-16  CRISIL AAA/Stable/ CRISIL A1+  20-01-15  CRISIL AAA/Stable/ CRISIL A1+   
            28-02-17  CRISIL AAA/Stable/ CRISIL A1+  27-01-16  CRISIL AAA/Stable/ CRISIL A1+       
Non Fund-based Bank Facilities  LT/ST  1000.00  CRISIL A1+  23-03-18  CRISIL A1+  15-09-17  CRISIL AAA/Stable/ CRISIL A1+  13-09-16  CRISIL AAA/Stable/ CRISIL A1+  11-08-15  CRISIL AAA/Stable/ CRISIL A1+  CRISIL AAA/Stable/ CRISIL A1+ 
        12-03-18  CRISIL AAA/Stable/ CRISIL A1+  28-04-17  CRISIL AAA/Stable/ CRISIL A1+  31-03-16  CRISIL AAA/Stable/ CRISIL A1+  06-08-15  CRISIL AAA/Stable/ CRISIL A1+   
            21-03-17  CRISIL AAA/Stable/ CRISIL A1+  30-03-16  CRISIL AAA/Stable/ CRISIL A1+  20-01-15  CRISIL AAA/Stable/ CRISIL A1+   
            28-02-17  CRISIL AAA/Stable/ CRISIL A1+  27-01-16  CRISIL AAA/Stable/ CRISIL A1+       
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bill Discounting 150 CRISIL AAA/Stable Bill Discounting 150 CRISIL AAA/Stable
Fund-Based Facilities 450 CRISIL AAA/Stable Fund-Based Facilities 450 CRISIL AAA/Stable
Letter of Credit 1000 CRISIL A1+ Letter of Credit 1000 CRISIL A1+
Overdraft 650 CRISIL AAA/Stable Overdraft 650 CRISIL AAA/Stable
Proposed Working Capital Facility 200 CRISIL A1+ Proposed Working Capital Facility 200 CRISIL A1+
Total 2450 -- Total 2450 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Mining Industry
CRISILs Criteria for rating short term debt

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000

Subodh Rai
Senior Director - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2000

Manish Kumar Gupta
Director - CRISIL Ratings
CRISIL Limited
B:+91 124 672 2000

Vardhman Chand Rai
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 3353
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
For Analytical queries:


Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.

About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
For more information, visit www.crisil.com 


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.


This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL