• The Company mined metal production in Q1FY20was 213kt, up 1% from a year ago, on the back of 10% higher ore production offset by lower grades. Integrated metal production was 219kt, up 3% from a year ago. Integrated zinc production was 172kt, flat y-o-y in line with mined metal production. Integrated lead production jumped by 13% y-o-y to 48kt. Integrated silver production was 159 MT, up 15% y-o-y on account of higher lead production.

• For Q1FY20, zinc metal cost of production before royalty (COP) during the quarter was was $ 1067 (Rs. 74,219) per MT, higher by 8% (7% in Rs) from previous quarter and higher by 2% y-o-y (6% in Rs). The COP during the quarter was impacted by higher power cost on account of lower generation due to water scarcity, more than offsetting the decline in coal price. Other reasons for the year-over-year increase were lower ore grades, higher mine development and higher prices for input commodities like cement, partly offset by higher metal volume and lower diesel prices. The sequential increase in COP was mainly on account of higher power cost, lower volume and lower grades.

• During Q1FY20, LME Zinc prices declined 11% to $2763 per MT, Lead prices fell 21% to $1885 per MT, and Silver prices dropped 10% to $14.9/oz.

Management Comments

Commenting on the Q1 performance, Ms Kiran Agarwal, Chairman, said: "Our expansion projects are on track and as they near completion, our position as an industry leader with large sustainable operations gets strengthened. We are one of the lowest cost producers with world-class assets which can deliver high returns to all our stakeholders in any market environment."

Mr Sunil Duggal, CEO, said: "We expect production volume to trend up in the coming quarters and along with internal efficiencies, technology and digitisation initiatives, costs to progressively reduce. As we approach the conclusion of 1.2 mtpa expansion, the journey towards 1.35 mtpa has been initiated. For this, we have ramped up our exploration to leverage the potential of existing deposits and new ore bodies to secure our future."

Mr Swayam Saurabh, acting CFO, said: "We are investing to make our operations future ready through digital transformation and environment friendly & cost effective technologies to increase ore-to-metal ratio. Our balance sheet remains one of the strongest in India with zero debt and we have operational discipline to achieve strong cash conversion, generating about $1 bn in free cash flow."

The total income from operation declined by 6% to Rs 4,987 crore for first quarter ended June 2019. The decline in revenue was primarily due to an average 13% decline in LME prices, partly offset by higher lead & silver volumes and rupee depreciation.

The Zinc & Lead segment revenue, contributing 86% of total revenue, dropped 8% to Rs 4,294 crore, while Silver segment revenue, contributing 12% of total revenue, jumped 5% to Rs 576 crore. The Wind Energy revenue, contributing 1% of total revenue, shed 4% to Rs 54 crore.

Operating margin (OPM) declined to 140 bps to 50%, due primarily to lower metal prices, as higher volume and lower manpower cost offset increase in power and other expenses, thus, operating profit (OP) dropped by 9% to Rs 2,477 crore.

At segment level, PBIT of Refined Zinc & Lead segment dropped 25% to Rs 1,427 crore, while Silver PBIT gained 6% to Rs 500 crore. Wind Energy segment PBIT shed 5% to Rs 39 crore.

The other income inclined by 45% to Rs 429 crore. Interest cost rose to 29 crore from Rs 11 crore in corresponding previous quarter. Depreciation cost rose 38% to Rs 534 crore, thus, PBT declined by 10% to Rs 2,343 crore. The taxation outgo decreased 16% to Rs 578 crore. Effective tax rate fell to 24.7% from 26.5% corresponding previous quarter, thus, the net profit declined by 8% to Rs 1,765 crore.

For the financial year ended March 2019 (FY 2019), the total income from operation of the company dropped 4% to Rs 22,118 crore. OPM decreased by 500 bps to 50.5%, thus operating profit declined by 13% to Rs 10,670 crore. Other income rose 4% to Rs 1,782 crore. With drop in interest cost by 54% to Rs 113 crore but rise in depreciation by 27% to Rs 1,883 crore, the PBT before EO fell 15% to Rs 10,456 crore. With NIL EO income during the period as against Rs 240 crore EO income corresponding previous period, the PBT after EO dropped by 16% to Rs 10,456 crore. The taxation outgo decreased 22% to Rs 2,500 crore. With drop in effective tax rate by 240 bps to 23.9%, net profit fell by 14% to Rs 7,956 crore.

• Capital mine development increased by 8% y-o-y to 11.3 km during the quarter.

• At Sindesar Khurd, shaft is fully commissioned and integrated with mine. The second paste fill plant was commissioned in June, liberating the mine to operate at full production capacity.

• At Rampura Agucha, shaft project is in advanced stage and expected to be completed in Q3 FY2020.

• At Zawar, India's first ever dry tail stacking plant will be commissioned in the current quarter, significantly reducing water consumption & land requirement and addressing tailing dam risk. Additionally, the two paste fill plants are on track to be commissioned in Q3 FY2020, enabling mining of left out high grade ore in old pillars.

• At Rajpura Dariba, the existing production shaft capacity is being upgraded from 0.7 to 1.3 mtpa to debottleneck the mine and is expected to be completed in Q4 FY2020. Further, a pre-feasibility study has been conducted to pump ore from underground to the mill to boost ore raising capacity.

Smelter debottlenecking to 1.2 mtpa is in progress, of which expansion to 1.13 mtpa will be completed in the current quarter. The commissioning of Fumer has already commenced.

Next phase of mine expansion from 1.20 to 1.35 mtpa

Detailed exercise to evaluate growth potential in grade improvement, increased tonnage, improved recoveries and increased reserves has commenced. This study will be followed by detailed scoping and feasibility by the Project Management Office (PMO) partner. The Company expect to have these studies and scoping to complete by Q4 FY2020.

In the meantime, following activities have commenced and are expected to be completed in the current quarter:

• Feasibility study on Bamnia Kalan

• Engineering for Rampura Agucha Galena zone and Sindesar Khurd Deep development and exploration

• Finalisation of PMO

In addition, engineering for water sustainability projects for Dariba and Zawar operations is under progress.

Liquidity and investment

As on June 30, 2019, the Company's cash and cash equivalents was Rs. 18,258 as compared to Rs. 16,952 Crore (net) at the end of FY 2019 and was invested in high quality debt instruments. The portfolio continues to be rated "Tier –1" implying Highest Safety by CRISIL. During Q1 FY2020, the Company repaid Rs. 2,000 Crore of short term commercial paper and there is no borrowing outstanding as on June 30, 2019.

The scrip closed trading at Rs 219.75 on 19^th July 2019 on the BSE.