Hindustan Zinc: India’s zinc giant needs more than a smelter. It needs a rethink – Stock Insights News

In the stock market, some companies make money while others make excuses.

And then there’s Hindustan Zinc, a cash-rich, asset-heavy, dividend-spewing behemoth that somehow looks stuck despite the stars aligning.

Let’s start with the basics. 

Commodities are moving. Zinc is steady, silver is soaring and demand is anything but soft. China may be uncertain, but India is charging ahead. Infrastructure, renewable energy, galvanization; all of it needs zinc. The world wants more clean energy storage, solar panels and EVs which aslo need silver.

And yet, Hindustan Zinc, the world’s largest integrated zinc producer, India’s silver crown jewel, is behaving like a company in slumber.

When a Giant Goes on Autopilot

This is a company with:

• 453 million tonnes of reserves.
• Operating margins north of 50%.
• One of the lowest costs of production globally — FY25 CoP came in at just $1,052 per tonne and Q4 at a near-record $994/tonne.
• 77% market share in domestic zinc sales, 100% captive power and a long-term plan to double capacity by FY30.

On paper, the investment case is solid.

The long-term thesis should write itself. 

But the stock is flat. 

The narrative is clouded. 

And the excitement is missing.

Because while operations are solid, the real concern lies elsewhere in capital allocation and corporate governance.

A Dividend Factory, Not a Growth Engine

Let’s talk numbers. 

In FY25, Hindustan Zinc made a net profit of ₹10,436 crore, paid out dividends worth ₹12,000 crore and ended up borrowing ₹2,000+ crore to do it.

Yes, this is a company that paid dividends by dipping into reserves and simultaneously taking on debt.

In doing so, it’s quietly turned from a cash cow into a capital-starved duck. 

FY24 ended with net cash. FY25 ended with net debt of over ₹6,000 crore.

What’s worse is that this isn’t a one-off. 

It’s a pattern because the promoter Vedanta has leaned on Hindustan Zinc for payouts to fund its own bloated structure. 

Shouldn’t Hindustan Zinc, a company with expansion ambitions, silver upside and low-cost strength, be investing in growth? 

Instead, it’s scrambling to balance debt, dividends and capex.

Mired in Governance Woes

Hindustan Zinc isn’t just dealing with balance sheet strain. It’s also grappling with credibility risk.

Recently, Viceroy Research, a US-based short-seller, flagged red flags in a brand-fee arrangement between Hindustan Zinc and its parent, Vedanta. 

They have alleged that Hindustan Zinc agreed to pay Vedanta for using the group brand, without securing government approval, as required under its shareholder pact.

That might sound like corporate fine print, but the implications are big. The government still owns 28% in Hindustan Zinc and could invoke a clause that forces Vedanta to sell shares at a discount. That’s a big governance risk as well.

To add insult to injury, this comes on top of investor unease over past attempts by Vedanta to sell its international zinc assets to Hindustan Zinc, a deal the government blocked.

This is why many believe that a turnaround is needed, not operationally, but in terms of management structure and independence.

Because good businesses can lose their way when the priorities of promoters conflict with shareholders’ interests.

Doubling Capacity… But with Half the Confidence?

In June 2025, Hindustan Zinc’s board approved a ₹12,000 crore expansion, which was the first step towards doubling capacity. 

A new 250 kilotonnes per annum (ktpa) smelter at Debari, a 2.4 million metric tonnes per annum (mmtpa) concentrator and mining upgrades will take refined capacity to 1.38 million tpa. Eventually, the plan is to hit 2 mmtpa by 2030.

It’s a bold move and theoretically, the right one.

But how do you fund it, if most of your operating cash is used for dividends?

The management says the expansion will be funded through a mix of internal accruals and debt. But that’s easier said than done when the dividend cheque goes out before the investment plan is drawn.

Is It Time for New Management?

Which brings us to the question no one wants to ask aloud:

Should Hindustan Zinc get a new management team?

Think about it. 

Here’s a company that has enormous cash-generating potential.

And is critical to India’s energy transition goals (zinc for infrastructure, silver for solar).

Enjoys cost leadership, ESG (Environmental, Social and Governance) credentials and expansion visibility. But has been weighed down by governance fog, dividend overreach and a promoter whose interests may not align with long-term compounding.

What it needs is not a new mine or smelter. It needs board-level independence, a clearer capital allocation policy and a recommitment to minority shareholders.

In any other country, a company like this would be a crown jewel of industrial strategy. In India, it’s fast becoming a cautionary tale.

Outlook: A Rock-Solid Core, If Only It Could Breathe

Despite the noise around dividends and debt, Hindustan Zinc’s underlying business remains a fortress. Operating metrics are world-class and demand visibility is high. Earnings momentum is expected to sustain, backed by stable zinc and silver prices, cost leadership and expanding volumes.

Hindustan Zinc’s Q4FY25 was impressive. Revenue up 20% YoY. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) margins at 53%. Cost of production at a four-year low. Plans for green zinc, rising renewable power and silver recovery tech show vision.

FY26 sales volumes are projected to inch higher, with modest cost inflation still keeping production well below global averages. EBITDA should comfortably remain above ₹16,000 crore, offering enough firepower to support both growth and shareholder returns.

But here’s the catch. All that firepower could fizzle out if capital allocation stays reckless. The company expects over ₹50,000 crore in pre-expansion free cash flows over the next five years. That’s more than enough to fund its ₹12,000 crore Phase I capex and still keep its balance sheet clean. But that provided the cash isn’t siphoned off through oversized dividends before it touches the ground.

The long-term story is that the doubling zinc capacity, tripling silver production, pushing low-carbon metal remains compelling. 

But numbers alone won’t fix what’s broken.

Because a company is more than its spreadsheet. It’s a story of trust, discipline and future alignment. And right now, Hindustan Zinc’s story reads like a world-class athlete stuck in a family business drama.

Unless something changes at the top, the market may continue to treat Hindustan Zinc not as a growth stock but as a dividend-bearing bond. 

And that’s not just a missed opportunity. It’s a slow erosion of what could have been India’s next global mining leader.

Disclaimer

Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information. 

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only. 

Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article. The website managers, its employee(s) and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein.  The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors.  Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.

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