• The Company total mined metal production for the quarter (Q1FY21) was down 5% y-o-y to 202kt due to fewer days of production in April and lower workforce availability on account of restrictions related to COVID-19. Ore grades were flat from a year ago as per mine plan and mix shift.

• Integrated metal production was 202kt for the quarter, down 8% y-o-y due to lower production in April. Integrated zinc production was 157kt, down 8% y-o-y while integrated lead production was 44kt, down 7% y-o-y. Integrated saleable silver production was 117 MT, down 26% y-o-y due to delayed stabilization of DSC lead smelter and increase in WIP, partly offset by higher silver grades.

• Zinc cost of production before royalty (COP) and adjusted for one-time costs (COVID-19 related donations & start-up costs) was $954 (Rs 72,004) per MT for the quarter, lower by 11% (3% in Rs) y-o-y. Reported COP was $1,019 (Rs 76,920) per MT and included Rs. 101 Crore ($53 per MT) for contribution towards PM-CARES fund. The COP benefitted from continued decline in coal, diesel and metcoke prices as well as structural cost reduction initiatives in the areas of consumption, contracting, fixed cost base and digitalization driven efficiency. These were partly offset by lower volume, lower grades sequentially and weak acid credits.

• During Q1FY21, LME Zinc prices declined 29% to $1,961 per MT and Lead prices fell 11% to $1,673 per MT, but Silver prices added 10% to $16.38/oz.

Management Comments

The total income from operation declined by 20% to Rs 3,989 crore for first quarter ended June 2020. The decline in revenue was primarily due to a 29% decline in zinc LME prices, 11% decline in lead LME prices, lower metal premium, and COVID-19 impacted lower volume, partly offset by rupee depreciation.

The Zinc & Lead segment revenue, contributing 80% of total revenue, dropped 25% to Rs 3,207 crore, while Silver segment revenue, contributing 16% of total revenue, rose 12% to Rs 645 crore. The Wind Energy revenue, contributing 1% of total revenue, fell 15% to Rs 46 crore.

Zinc cost of production before royalty (COP) and adjusted for one-time costs (COVID-19 related donations & start-up costs) was $954 (Rs 72,004) per MT for the quarter, lower by 11% (3% in Rs) y-o-y. Reported COP was $1,019 (Rs 76,920) per MT and included Rs. 101 Crore ($53 per MT) for contribution towards PM-CARES fund. The COP benefitted from continued decline in coal, diesel and metcoke prices as well as structural cost reduction initiatives in the areas of consumption, contracting, fixed cost base and digitalization driven efficiency. These were partly offset by lower volume, lower grades sequentially and weak acid credits.

Operating margin (OPM) declined to 40% from 50% in corresponding previous quarter, thus, operating profit (OP) dropped by 36% to Rs 1,576 crore. The drop in OP was primary on account of lower revenue, contribution towards COVID-19 donations and one-time start-up costs, partly offset by lower operating costs.

At segment level, PBIT of Refined Zinc & Lead segment dropped 63% to Rs 522 crore, while Silver PBIT rose 6% to Rs 553 crore. Wind Energy segment PBIT dropped 23% to Rs 30 crore.

The other income inclined by 59% to Rs 684 crore. Interest cost rose by 79% to Rs 52 crore. Depreciation cost was up 2% to Rs 544 crore. Thus, PBT declined by 29% to Rs 1664 crore. The taxation outgo decreased 47% to Rs 305 crore. Effective tax rate decreased 630 bps to 18.3%. Thus, the net profit declined by 23% to Rs 1,359 crore.

For the financial year ended March 2020 (FY 2020), the total income from operation of the company was down 12% to Rs 18561 crore on account of an average 12% decline in LME prices and lower volume, partly offset by higher silver prices and rupee depreciation.

OPM decreased by 290 bps to 47.7%, thus OP declined by 17% to Rs 8847 crore. Zinc COP excluding royalty was $1047 (Rs. 74,172), higher by 4% y-o-y (5% in Rs).

Other income rose 9% to Rs 1934 crore, thus, PBIDT declined 13% to Rs 10781 crore. With drop in interest cost by 1% to Rs 112 crore and with rise in depreciation by 21% to Rs 2279 crore, the PBT, as a result, fell 20% to Rs 8390 crore. The taxation outgo decreased 37% to Rs 1585 crore. The effective tax rate fell 500 bps to 18.9%. Thus, net profit dropped by 14% to Rs 6805 crore.

• The Company's project work was resumed at all sites in June 2020 while complying with COVID-19 guidelines and providing essential training and awareness to ensure safety and well-being of all workers and business partners. Consequently, the commissioning of back-fill plants at Zawar is expected to be completed in Q2. Fumer plant is ready for commissioning and is waiting for OEM support delayed due to visa and travel restrictions.

• The Company's has commissioned a 10 MLD STP in Udaipur and another 5 MLD plant is in its final stages of commissioning, which will take the total STP capacity to 60 MLD. This will treat major portion of the sewage of Udaipur city. While part of the recycled water will continue to be used by our plants, the remaining water will be discharged back into the river to augment ground water levels and help downstream agriculture.

• As on June 30, 2020, the Company's net cash and cash equivalents was Rs 15,480 crore as compared to Rs 21,596 crore at the end of FY2020 and was invested in high quality debt and other fixed income instruments.

Outlook

The Company's expects both mined metal and finished metal production in FY2021 will be higher than last year and is expected to be between 925-950 KT each. FY2021 saleable silver production is projected at c.650 MT.

Zinc cost of production in FY2021 is expected to remain below $1,000 per MT. The project capex for the year is expected to be in the range of US$100-140 million.

The scrip closed trading at Rs 182.95 on 21^st July 2020 on the BSE.