Ladies and gentlemen, good day and welcome to the Hindustan Zinc Limited Q3 FY 2021 earnings conference call. I now hand the conference over to Ms. Shweta Arora, Head of Investor Relations at Hindustan Zinc Limited. Thank you and over to you, ma'am. Good afternoon, everyone, thank you all for joining us today for Hindustan Zinc's third quarter fiscal year 2021 results call. Today on the call we have with us our CEO, Mr. Arun Misra, and our CFO, Mr. Swayam Saurabh. Mr. Misra will begin with an update on business performance while Swayam will take you through financial performance, after which we will open the floor for questions. I now request Mr. Misra to begin today's call. Over to you, Mr. Misra. Thank you, Shweta. Good afternoon and a very warm welcome to all of you. I trust that you and your families are safe and maintaining all precautions against the spread of COVID-19. I would like to begin today's presentation by sharing an excellent achievement on sustainability side. Hindustan Zinc is included in the list of A-rated companies for climate change Carbon Disclosure Project. We are among the two companies in metal and mining sector across the globe which scored A rating in the climate change. I am humbled to share that Hindustan Zinc is a part of Business Leaders Group COP26, which is actively engaged in setting the agenda for the 26th meeting of countries that signed the United Nations Framework Convention on Climate Change to be held at Glasgow, U.K. in November 2021. I'm also happy to update you on Dow Jones Sustainability Index. We have maintained our first position in Asia Pacific region in the metal and mining sector for third consecutive year and ranked seventh globally in the metal and mining sector. At Hindustan Zinc, we hold welfare of our communities surrounding our operations very close to our heart and always endeavor to give back and make a difference. Our CSR team actively engages with the communities through various flagship projects to ensure that all efforts are directed in a meaningful manner which adds value to their lives. I am proud to share that Hindustan Zinc has been identified as responsible business of the year for its exemplary work in community development and awarded with Grant Thornton SABERA Award 2020. This is reflective of the trust-based harmonious relationship that we have nurtured with our communities over the years. Turning to update on operational performance during the quarter, I'm happy to share that we have continued our winning streak from last quarter and touched a few milestones this quarter as well. We saw an ever highest ore production supported by proactive mine planning, driven by increased use of technology and better targeting. We also successfully managed our cost at lower levels and our nine months to date cost is at the lowest level since we transitioned to underground mining operations in March 2018. Coming to market update. Global mine supply continued to face COVID-19 related disruptions and significant production was lost in China, Peru, Bolivia and Mexico, some of which is likely to be permanent in nature. Mines across the world are facing operational challenges to ramp up production while complying with social distancing norms. According to Wood Mackenzie, mine production in calendar year 2020 was down 3% and concentrate market remained in deficit to the order of 220 kilotons, as smelters were not severely impacted due to low manpower requirements. Marine logistics challenges also led to supply shortages in the market. In China, TCs for imported concentrates continued to fall and reached below $100, which might hamper refined output going forward. Global demand, on the other hand, is expected to have a V-shaped recovery. The manufacturing sector in China was the quickest to return to normal, with industrial utilization rates back to pre-pandemic levels by May. The real estate sector also saw a rapid return to normal, and by October and November, China's retail sales were also back to normal. In the United States of America, the new administration is likely to invest in upgrading infrastructure and to decarbonize the economy, both of which will support zinc demand. Driven by this fundamental support, zinc prices faced a strong rally during the quarter. Prices peaked at $2,800 per ton while averaging at $2,628 per ton in quarter three, up 10% year-on-year and 13% quarter-on-quarter. Various government financial stimulus and rollout of vaccination programs across the globe is expected to drive economy towards a faster recovery path. Wood Mackenzie estimates zinc LME prices to average at $2,800 per ton in 2021. Coming to domestic market. As migrant workers return, downstream manufacturing units reported achieving 90%-100% plant utilization. Zinc apparent consumption in quarter three FY 2021 was up 6%-7% on a year-on-year basis and 12%-13% quarter-on-quarter basis. Subsequently, premiums also rose significantly. Major steel manufacturers have signaled a tremendous improvement in demand and hinted at strong quarterly results, which also provided support to Zinc metal. Finance Minister's assurance to continue fueling economic growth also offers a promising outlook for next two to three quarters for Zinc demand. Coming to Silver. Global investor interest remained weak during the quarter as short-term macroeconomic outlook improved and with news of vaccine rollout. This drove investors to other high-yielding asset classes. Subsequently, Silver prices were only up 1% at $34 per troy ounce. Turning to operational updates. During the quarter, our mined metal production was up 4% from a year ago to 244 kilotons on account of higher ore production resulting from better mine planning, partially offset by low overall grades. Sequentially, mined metal production grew 22%, supported by higher ore production. Talking about nine months to date performance, mined metal was up 2% year-on-year. Integrated metal production was at 235 kilotons, up 7% from a year ago and down 1% sequentially, in line with availability of mined metal with zinc at 182 kilotons and lead at 52 kilotons. Saleable silver production was 183 metric tons, soaring 23% year-on-year on account of higher Lead production, partially offset by lower grade at SK mine compared to a year ago. Sequentially, the production was down 10% due to lower lead production and dip in metal grades in SK mine. Coming to an update on our projects. I am happy to share that environmental clearance that was recommended in the previous quarter by Expert Appraisal Committee for Zawar Mine expansion from 4- 4.8 million tons per annum has been received. Chanderiya Lead Zinc Smelter has also received environmental clearance for expansion from current 0.42 million tons per annum to 0.50 million tons per annum. As guided previously, both the backfill plants at Zawarmala and Mochia mines were commissioned during the quarter. I am also happy to share an update on our e-commerce platform, Evolve, which was launched in September last year. We have crossed 4,000 tons sale of metal through the online platform and able to reach out to MSME customers with live exchange benchmarked prices and as low as one ton delivery for zinc and lead metals. We are delighted that the portal has been well received in the market and customers are transacting on daily basis. The online commerce portal has also received recognition for best e-commerce portal and technology innovation in various industry forums like CII and Snapdeal Awards. Lastly, an update on fumer commissioning. Due to ongoing COVID-19 disruptions, including visa restrictions for Chinese nationals, final commissioning of fumer plant at Chanderiya is not completed yet, and efforts are ongoing for an early resumption. As my closing remark, I would like to draw your attention to our previously guided FY 2021 volumes for both mined metal and refined metal in the range of 925-950 kilotons each, and silver at 650 metric ton. I am happy to inform you that we are on track to achieve the previously guided numbers on metal volume and given our strong performance, we are likely to exceed our previously guided silver volumes. With this, I hand over to our CFO, Mr. Swayam Saurabh to update on the financial performance. Thank you, Arun. Good afternoon and a very Happy New Year to everyone. As outlined by Arun, we continue to strengthen our foundation of our core operation and are delivering on volumes while structurally bringing down the cost through various initiatives. As a management team, our focus is further sharpened and we are approaching growth via streamlining operating processes and imbibing the culture of detailed planning and more importantly, efficient execution. We are constantly working towards the resilience of our assets so as to deliver consistent shareholder value throughout the economic life cycles. In these uncertain times, our strength lies in delivering strong free cash flow from operations, which enable us to invest in the growth of our business, consider new projects while also giving consistent returns to our shareholders. We will always try to strike the delicate balance of generating long-term value and distributing returns to our shareholders. I would also like to point out that while we have our unwavering focus to deliver on operational and financial excellence, at the same time, we remain equally cognizant to our ESG commitments and sustainability goals. I'm happy and proud to see the emerging maturity of our sustainability initiatives. We are developing processes that are well laid out to incorporate both financial and sustainable aspects in day-to-day business decision-making. The same has started to show some green shoots as we embark on this journey to achieve the sustainability goals that we have set out for ourselves. We do recognize that there is still a lot of work to be done here, and we'll continue to take inspiration from global best practices to stay ahead of the curve. Coming to financial performance for the quarter. Revenue from operations during the quarter witnessed an increase of 39% year-on-year and was at INR 6,033 crores due to higher zinc volumes, which were up 6% year-on-year and an increase of 30% in lead volumes year-on-year. This was further supported by higher silver prices and volumes and higher zinc prices as well as rupee appreciation over the year. Some of these gains were offset by a fall in lead LME on a year-to-year basis. Compared to the previous quarter, revenue rose 7% primarily driven by higher zinc lead LME prices. Sequentially, zinc LME rose 13% and lead LME increased 1%. This was further supported by higher metal premiums resulting from revival in domestic demand. Some of the gains were offset as price realization were impacted by rupee appreciation quarter-over-quarter. Reported zinc cost of production before royalty for this quarter was $946 per ton which was up 3% sequentially, but down a lower 12% from a year ago. This, however, includes a one-time employee cost, which is equivalent to approximately $20 per ton. If you exclude that, it's fairly closer to the last quarter's cost of production. All this is a result of our constant effort to bring down costs through structural optimization initiatives and maintain it at consistently low levels. As outlined by Arun earlier, we are proud to share that on a nine-monthly basis, we are at the lowest cost in dollar terms since we transitioned to a fully underground mining operations. I would like to reiterate that extraordinary efforts on all fronts, including consumption, contracting, procurement, and fixed cost optimization has resulted in this sustained reduction of costs, which we are confident will continue. Resulting EBITDA for the quarter was INR 3,313 crore, higher 45% from a year-ago and 12% sequentially on account of higher revenue and well-managed operating costs. Net profit for the quarter was INR 2,200 crore, a stellar increase of 36% from a year-ago and up 13% sequentially. This was driven by recovery in metal prices, a strict cost discipline and slight volume gain. Tax rate, as guided in previous quarters, is at an average of about 24.5%. The higher normalized level is due to change in income mix in light of lower interest rate environment. Coming to our previously guided costs and CapEx for the fiscal year. As you would have seen, we have successfully reset our cost to a lower level and are confident to consistently keep zinc cost of production down. Given the strong performance, we are likely to exceed our previously guided cost numbers to keep where we communicated earlier that the zinc cost of production will be below $1,100 per ton for the fiscal year. This we are able to re-guide despite higher mine development expenditure. This is emerging out of the efforts which has been made around bringing our cost structurally down. As for CapEx, we keep our guidance intact with a focused approach and exercise prudence in an uncertain business environment and strike a delicate balance between investing in growth while conserving the cash. With this, I open floors for question. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Please enter them and we will wait for a moment while the question queue assembles. Reminder to participants, in the interest of time, we would request each participant to limit their questions to one per participant. Should you have any follow-up, you are welcome to rejoin the queue, please. The first question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead. Yeah, thanks and congratulations on good results and the statements on the (15th of April). My first question is on the backfill. So the backfill plant which you've commissioned, what sort of volumes of grade and ton can we expect from those plants in the coming quarters and the timeline for the same? Secondly, on the fumer plant, Hindustan Zinc did not give the same severity of COVID-19, but these plants are operated across the globe by all the peers, so just not able to understand what sort of technical challenges we are facing in commissioning. If you could just share some more light on that, it will be very helpful. Yeah. Let me take the backfill plant question. Backfill plant would not necessarily translate into a better grade. Backfill plant would help us fill our stocks faster. This would make our production process more consistent and disciplined, which would simply mean that my ability to forecast and meet that forecast consistently in volume terms would be more accurate. It could also make mines stable to the life of the mine plan. On fumer, the delay is primarily on final commissioning. As it was also mentioned last quarter, we are facing some issues in terms of our Chinese contractor traveling out of China, and that is something we are looking to resolve. We think we should be able to complete remaining fumer work by end of this quarter, latest by April, and fumer should be operational by then. Understood. On the volume growth path, I think we will be ending this year at around 1.2 million tons of refined capacity. What sort of utilization and the ramp-up schedule can we expect in next year, FY 2022? No. This year we were planning to have 1.2 million tons. Since we lost considerable time in quarter one and especially in the month of April due to COVID-19 and the ramp-up got affected because of COVID-19. Parallelly, to liberate the mine, the development had to happen. This quarter, we achieved a development figure of about 27 km, which is highest ever in a quarter. We are on that path. We are now correctly poised to achieve the full year, unaffected year if we have next year. That should show a likelihood of achieving this 1.2 million ton goal. Understood. Without any disruption, one can expect a very strong volume growth next year given the current year we ended around 950. Currently we are at absolutely in the process, and quarter four should show an exit rate of 1.2 million ton MIC, which should then continue into the next year. I would like to add that although we have been able to show an exceptional recovery in terms of our volume in last two quarters, COVID has not completely gone. I think our current focus is to get to a 1.2 million ton equivalent run rate in quarter four. From then all development which is happening and the investments which has been done should translate into a significantly higher run rate for next year. Okay. Just to follow up, the domestic and export mix, has that normalized to normal levels of around 25% export? Yeah. This was already a question last quarter. Large part of normalization already happened last quarter, where we saw from almost 65%-70% export sale in COVID-impacted quarter one going down to 29%. This quarter, our exports are 26%. This has, I think, broadly reached the normal level. Got it. Thanks a lot and all the best. Thank you. Thank you. The next question is from the line of Amit Dixit from Edelweiss Securities. Please go ahead. Thanks for the opportunity and congratulations for a good set of numbers. I have two questions. The first one is that in your prepared press release, there is a mention of grade issue with SK. Can you please elaborate more on that and whether these issues have been overcome? That is my first question. Okay. In a mine, although we operate on an overall life of mine plan. Okay? The grade issues are transient. As you go from level to level, you would encounter grade issue. There is nothing wrong geologically or overall resource wise, but you will encounter lower grade at some quarter, and you will also be compensated by higher grade in the other quarter. It is part of that life of mine plan, and we have to transition that journey. Overall grade would remain same over a five-year period, but we'll have these fluctuations from time to time. I don't see anything abnormally wrong that needs to be corrected. Absolutely. Okay. What was the grade? Can you share with us the grade that you put in this quarter and how does it compare with last quarter? The grade in this quarter three, is at 7.06%. It's close to a% decline versus quarter two, where it was 7.14%. Going forward, we think grades should normalize, go back to 7.15%, 7.2% levels, something we have been guided in the past. Okay. Wonderful. The second question is on the concurrent investment. Is there some kind of investment that we are carrying out in mining facilities in this quarter? There are no such plans. There's no plan as such. There are no such plans. Okay. Fair enough. Thank you. Thank you. The next question is from line of Indrajit Agarwal from CLSA. Please go ahead. Yeah. Hi. Thank you for the opportunity. Sir, can you please speak closer to the hand please? Your voice is breaking up. Mr. Agarwal, so sorry, we'll request you to move towards the reception area, please. We are unable to hear you. What was the $20 per ton higher employee cost because this cost of production, which you mentioned in your Q3 number? It was a one-time payout, which management decided to do across all grades to all employees, as a sort of goodwill gesture, sort of compensating for variable pay. This was a call taken by the management for the fact that people have been working through this COVID, sort of recognition, but also kind of reinforcing our commitment back to them. This entire thing will reverse in the subsequent quarters? No. This is a one-off cost. You should exclude this in predicting costs for future quarters. Okay. How do you see the impact of higher coal cost in the cost of production in quarter and going ahead? Right. This is something we are also watching closely. If you look at our coal mix in this quarter, we have used about 23% of domestic coal. The imported coal which we had bought during last quarter, indeed, were at, let's say, significantly economical prices than the price of it we see right now in the market. While quarter four is something we are watching closely, we do not see big impact. Plus also, we believe that given the global focus which exists right now in moving towards cleaner energy, long-term demand of coal is not going to change very significantly to drive price up in an extremely adverse way. We are more balanced here. We do see a little bit of impact coming in quarter four. We do think that in next six, 12, 18 months, coal prices should remain within the range. Sure. Thank you so much. That's all from my side. Next question is from the line of Pallav Agarwal from Antique Stock Broking. Please go ahead. Mr. Pallav Agarwal, your line is in talk mode. Kindly go ahead with your question. Yeah. Good evening, sir. Good evening. Just had a question on how our net cash has moved during this quarter. I understand there would be the impact of the dividend payout. If you could just walk us through how the net cash has declined from September that actually increased this quarter. Yeah, sure. I'll give you a very high rundown. If you need any specific detail, you can reach out to our investor relations team. Opening cash was INR 27,631 crore. If you recall, we paid a dividend of almost INR 9,000 crore. We had generated an EBITDA of INR 3,114 crore. There's slight working capital change, about INR 100 crore negative, primarily locked in debtors, which we should recover this quarter. CapEx and tax put together was about INR 1,300 crore, which essentially translates into a free cash flow after CapEx and working capital change of INR 2,100 crore. As I said, that INR 2,100 crore, INR 9,000 crore dividend payout and there was some operational items, INR 3,200 crore translating into closing cash of INR 21,000 crore. Okay. Thanks for that. On the capital part, while you mentioned the project capital is between $ 100 million and $ 150 million, what would be the total annual maintenance capital for the year? Sorry, can you repeat your question? Yeah. I am asking about the maintenance capital for the year. You mentioned the project capital will be between $ 100 million and $ 150 million. What would be the normal maintenance? We guided the total CapEx to be in the range of about $330 million. Out of that, about $ 140 million was growth CapEx, so about $190 million was sustaining CapEx. Looking at where we stand in quarter three, we should be able to hold this CapEx guidance. Okay. Thank you. Thank you. Thank you. you. Next question is from the line of Vishal Jain from ICICI Prudential Financial Services. Please go ahead. Yeah. Thank you very much, sir. I think these are a good set of numbers. Sir, since the line is being closed again, please your voice is not audible. Sorry. Is that okay? Yes, we can hear you. Okay. My first question was with respect to the interest cost that has moved up sharply in this quarter. Has there been an uptick in the debt markets? What are our plans on the balance sheet leverage going forward? If you recall, our dividend payout was done in this quarter. Something I've been mentioning also in the previous quarter, that while we have quite significant, in fact INR 21,000 crore-odd cash and investment equivalent, they may not necessarily be liquid. Basically, to manage the temporary cash flow mismatch, the borrowings were taken. Borrowings as on December end is slightly above INR 10,000 crore which primarily was done to support this temporary cash flow mismatch. Going to what extent we are open to lever our balance sheet. If you look at our ability to generate cash, we probably don't need any debt. Any debt which will be taken would only be for a purpose where I don't have liquidity to support. I would like to leave it there. Got it. Thank you so much. My second question is with respect to your expansion program from 1.2 million ton to 1.35 million ton. Where are we in terms of those plans? Right now, we are totally focused on first fructifying that 1.2 million tons attainment. That is the first milestone. At the same time, we are on the drawing board to do the life of mine planning, which should set us up for 1.35 million tons. To give you some supporting numbers, we are currently running in quarter three at about 10 km per month mine development rate. If we have to achieve 1.35 million tons, we have to translate to about 13-14 km per month of mine development rate. As we stand today, we are discussing with various business partners, how do we achieve this 14-km development rate, which will in a way go to support 1.35 million tons, but that will come only after we attain our goal of 1.2 million tons MIC production first. Got it, sir. If I may squeeze in one question. The one-time expense you mentioned was about $20. What would be the actual number for that in the rupee cost? It would be about INR 16 crores. INR 16 crores. Is Is that an interesting number? Excuse me. Sorry, it would be about INR 35 crores. INR 35 crores. That's included in the Q3 numbers. That's right. Yeah, that's correct. Thank you very much, sir. Thank you. Next question is from the line of Ritesh Shah from Investec. Please go ahead. Hi. Thanks for the opportunity. I have two questions. One is for Swayam sir. Sir, when you indicate we look to balance growth CapEx versus conserving cash, can you explain how we are looking at balancing these two variables? Just a related question over here. At what stage are we for Gujarat's 300 KTPA smelter, which has been announced and commissioning earlier was by 2022, and the refinery project in Rajasthan? That's the first question. Sure. The simplest way to balance, Ritesh, is change your hurdle rate. It automatically helps you reprioritize. That's what we did when we were hit by COVID-19. I also mentioned back in quarter one that we are very clear anything to do with growth of 1.2%, 1.35%, 1.5% remains untouched. There were other topics which we basically re-looked at. Looking at the fact that we are getting back to normal, we as management team would also look at going into 2021. Should we be holding such a high hurdle rate or should we re-look at it? That's something we would look to do going into maybe March or April. On Gujarat smelter, the current stage we are in is after signing of the MoU with Government of Gujarat. We have hit the ground on community engagement. We are also going through the process of environmental clearance. At the same time, the design engineering work is on, and within a very short time, post-board approval, we'll be coming to you and inform you regarding the project CapEx outlay and the deliverables. As far as the timeline is concerned, that is given and that stays firm at 2022. Yeah. As part of this validation, we will also know exact return of this project, which would allow us to take a final decision. Thank you. The next question is from the line of Rahul Jain from Systematix Shares. Please go ahead. Yeah, hi, good evening. Rahul here. Sir, I have two questions. One is that you mentioned that you've got some EC approvals for increasing mine plan in SK and also Chanderiya smelter. Are we going to take up these projects soon or is this just for future backup? As far as my Zawar Mine, it is immediately because as we go towards 1.2 million tons, some of the mines the reserves will slowly getting exhausted and the other mines have to ramp up. That is one. Second is grade balancing between different mines will call for increasing ore productions in different mines. Zawar Mine is the first target where next year we should see an uptick on the ore production. That's why the environmental clearance is there and that will be useful. Similarly, in Chanderiya, once we go to the MIC level of 1.2 million tons, automatically the smelting requirement goes up. Wherever the balance was not permitting, we have taken the clearance first, which will be impacting in Chanderiya smelter. Then RD, Rajpura Dariba Mine also has got a 2 million ton clearance. We'll try to maximize up to 2 million tons in RD mine as well. Right. Sir, the government is proposing to change mining laws. I've got two key proposals that come to mind are the captive, non-captive removal, and second is the cancellation of the 500 (pending) licenses. How do we look at it as an opportunity, or do we think we get impacted by these proposals which are there? As of now, all our captive mine status of the mines which are there prior to promulgation of the changes, they are not impacted. You are perhaps referring to 10A, 2B cases which are on the previously allotted. That is we are already under the legal jurisdiction, and we would wait for the court verdict on how that will apply on the newly made changes on 10A, 2B cases. Could you tell us what exactly details are those? Details in the sense there were mines for which the PL were granted beforehand, and then there were confusion after the 2015 amendments came whether those PLs are valid or not valid. We have a certain view, whereas some of the relevant agencies have another view. Those are depending upon the judgment that we get, we will proceed. It's under legal purview now. You're saying it may not get impacted by the amendment or that it will remain separate. Is that the right way of looking at it? That's what is our firm belief. Okay. Thank you so much. Thank you. We take the last question, a follow-up from the line of Yudhraj Agarwal from CLSA. Please go ahead. Hi, sir. Can you shed some light on Zinc demand in India? How has it changed in the past quarter and how do you see it going forward? Domestic Zinc demand. Correct. Post-COVID-19, the domestic Zinc demand is increasing and it is also accompanied by the strong turnaround in the steel sector. If the steel companies are looking at posting best ever results in the quarter three, that is what we expect them to post. That should actually show that the wind is in our favor in consumption of Zinc domestically. We are seeing that in the market that customers are coming back to us with bigger quantities and we are able to now touch newer customers who are looking for our metal. Just to add, if you look at the entire spectrum across infra sector and also what is expected in terms of upcoming budget, we think there is a lot more positivity of the infra push, which will translate into a better zinc demand. Thank you. Thank you. We now hand the conference over to Shweta Arora for closing comments. Thanks, everyone, for being on the call today. For any follow-up questions or clarifications, please feel free to reach out to investor relations team. Thank you. Thank you. Ladies and gentlemen, on behalf of Hindustan Zinc Limited, that concludes this conference.