Due Diligence of Hindustan Zinc
PSU Disinvestment through
Stratergic sale
Overview of the presentation
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Brief Snapshot of Hindustan Zinc Limited (HZL)
Analysis of mines/smelters, assets, employees
Past Financials
Zinc Industry
Investment Perspective
Valuation
Time table for future
Transaction Details
Transaction Documents
Brief Snapshot of HZL
• Only integrated primary producer of zinc & lead in
the country
• Accounts for almost 80% of the country’s zinc
production
• Headquartered in Udaipur
• Owns 6 mines (operates 4) and 4 smelters
Capacities & Production
PRODUCT
Zn Ingots
CAPACITY
PRODN. 2000-01
PRODN. 2001-02
(9 mths)
169,000 MT
148,092 MT
132,542 MT
43,000 MT
34,840 MT
28,993 MT
86,000 kg
35,127 kg
36,946 kg
338,000 MT
271,714 MT
239,162 MT
Cadmium Ingots
740 MT
277 MT
298 MT
Copper Cathode
2,100 MT
213 MT
128 MT
Lead Ingots
Silver
Sulphuric Acid
11 mths
Zn Ingots
161,300 MT
12 mths (est)
180,000 MT
Financial Highlights
(Rs. mn.) as on
Share Capital
31.03.2001
31.12.2001
4,225.3
4,225.3
11,602.6
11,867.4
PAT
1,692.2
323.4
Net Fixed Assets
6,642.4
6,484.6
Net Current Assets
4,186.4
4,036.6
Net Worth
Mines & Smelters
Mines - Details
MINE
RAMPURA
AGUCHA
Ore with Grade Lead-Zinc
Zn 13.70%
Pb 1.90%
RAJPURA
DARIBA
Lead-Zinc
Zn 8.00%
Pb 2.10%
ZAWAR
Lead-Zinc
Zn 4.63%
Pb 2.40%
AGNIGUNDALA
Lead
Pb 2.10%
Capacity
4500 tpd
2400 tpd
4000 tpd
240 tpd
Type
Open Pit
Underground
Underground
Underground
Estimated Life
23 yrs
15 yrs
10 yrs (750,000 tpa)
+8 yrs (300,000 tpa)
11 yrs
Lease renewed
upto
March 13, 2020
May 29, 2010
March 29, 2010
November 21, 2013
Bhilwara – 80 km
Udaipur – 80 km
Nearest City
Cost of
Production
(2001-02)
Rs. 5,691 / MT
Rs. 17,326 / MT
Udaipur – 44 km
Rs. 16,863 / MT
Guntur – 25 km
Rs. 16,425 / MT
Global Mining Cost Comparison
MINE
RAMPURA
AGUCHA
RAJPURA
DARIBA
ZAWAR
Cost of Production (Rs./T of
concentrate)
5,691
17,326
16,863
Concentrate Grade
54%
51%
55%
Cost of Production ($/T of
metal)
216
697
629
Breakeven cost at LME of
$800/MT and related TC/RC
321
321
321
Breakeven cost at LME of
$900/MT and related TC/RC
380
380
380
Breakeven cost at LME of
$1000/MT and related TC/RC
439
439
439
Scope for improvement ($/MT
of metal)
-
376 / 317 / 258
308 / 249 / 190
Smelters - Details
SMELTER
Metal
Capacity
Process
Recovery
(2000-01)
Nearest City
Cost of
Production
(2001-02)
CHANDERIYA
DEBARI
VIZAG
TUNDOO
Zinc & Lead
Zinc
Zinc
Lead
Zinc – 70,000 tpa
Lead – 35,000 tpa
59,000 tpa
40,000 tpa
8,000 tpa
Zinc – ISP
Lead – Pyro
Electrowinning
Electrowinning
Pot Sintering
Zinc – 90.67%
Lead – 89.86%
95%
87%
87.15%
Udaipur – 15 km
Vizag
Dhanbad – 36 km
Bhilwara – 45 km
Zn - Rs. 35,379 / MT
Pb – Rs. 30,802 / MT
Rs. 53,150 / MT
Rs. 53,344 / MT
Rs. 59,848 / MT
Global TC/RC Comparison
SMELTER
CHANDERIYA
Cost of Zn Production
(Rs./MT)
21,782
32,863
32,244
Cost of Zn Production
($/MT)
447
674
661
TC/RC ($/MT of metal) at
LME of $800/MT
479
479
479
TC/RC ($/MT of metal) at
LME of $900/MT
520
520
520
TC/RC ($/MT of metal) at
LME of $1000/MT
561
561
561
Scope for improvement
($/MT of metal)
-
DEBARI
VIZAG
195 / 254 / 213 182 / 141 / 100
Employees
Employees
WORKMEN
EXECUTIVES
TOTAL
As on 30.9.2000
9,482
1,339
10,821
As on 24.10.2001
8,625
1,306
9,931
VRS Accepted &
Paid
1,348
228
1,576
As on 1/3/02
7,277
1,078
8,355
CONTRACT
as on 30.6.01
3,254
3,254
Employees (as on 1/3/02) – Break-up
EXECUTIVES
WORKMEN
TOTAL
CONTRACT
(as on 30.6.01)
Smelters:
1. Chanderiya
184
631
815
652
2. Debari
100
1,022
1,122
456
3. Vizag
117
898
1,015
531
33
514
547
45
1. Rampura Agucha
110
606
716
490
2. Rajpura Dariba
113
1,201
1,314
422
3. Zawar Mines
180
1,822
2,002
375
4. Agnigundala
19
170
189
130
5. Sargipalli
32
1
33
0
6. Maton
16
23
39
3
174
389
563
150
1,078
7,277
8,355
3,254
4. Tundoo
Mines:
Others
TOTAL STAFF
Other Assets
Other Assets
City
Nos.
Nature
Bani Park (Flat)
2
Owned
1050 x 2
Bani Park (Flat)
1
Owned
1,650
M. G. Road (Office)
1
Rented
1,139
Vijaynagar (Flat)
1
Owned
1,075
Vijaynagar (Flat)
1
Owned
1,278
Vijaynagar (Garage)
1
Owned
203
Nehru Place (Office)
1
Rented
1,290
Nehru Place (Office)
1
Rented
645
SCOPE-Lodi Road
1
Rented
1,079
SCOPE-Laxmi Nagar
1
Rented
6,000
Asiad Village (Flat)
1
Rented
1,241
Ring Rd. Lajpat Nagar
Guest House
1
Rented
6,600
Ghaziabad
Devika Apartments
4
Owned
1020 x 4
Hyderabad
Saifabad (Office)
1
Owned
3,613
Saifabad (Garage)
1
Owned
200
Saifabad (Flat)
1
Owned
1,714
Jaipur
Bangalore
Delhi
Location
Area (sq.ft)
Other Assets
City
Mumbai
Kolkata
Location
Nos.
Nature
Nariman Pt. (Office)
1
Rented
1,650
Santacruz (East) - Flat
1
Owned
580
Santacruz (East) - Flat
1
Owned
566
Santacruz (East) - Flat
1
Owned
910
Borivili (East) - Flat
1
Owned
1,100
Borivili (East) - Flat
1
Owned
1,100
A. J. C. Bose Rd., Tollygunge
2
Owned
1159 x 2
1
Owned
2
Owned
2324 x 2
1
Owned
200
Owned
approx. 30,000
Car park
CIC Bldg, (Flats)
(Car Park)
Udaipur
H O – Yashad Bhawan
Area (sq.ft)
Past Financials
Summary P&L Accounts – Past
Rs. mn.
1998-99
Net Sales
1999-2000
2001-02
(9 mths)
2000-01
11,258
13,144
14,436
9,179
Other Income
368
499
198
237
Total Income
11,625
13,643
14,634
9,415
Total Expenditure
9,362
11,042
11,200
8,006
PBDIT
2,263
2,601
3,434
1,409
Depreciation
572
670
577
459
Interest
152
105
25
168
VRS amortised
290
PBT
1,539
1,826
2,832
494
PAT
763
904
1,692
218
Cash profit excluding
extraordinary items
1,417
Summary Balance Sheet - Past
Particulars
(Rs. mn.)
31.3.1999
31.3.2000
31.3.2001
31.12.2001
(provisional)
Share Capital
4,225
4,225
4,225
4,225
Reserves & Surplus
5,572
6,218
7,377
7,642
940
150
57
642
6,557
6,482
6,642
6,485
–
–
830
830
Current Assets
7,163
8,676
7,649
7,045
Current Liabilities
2,983
4,564
3,462
3,008
Net Current Assets
4,180
4,112
4,186
4,037
Loans
Net Fixed Assets
Investments
Cashflow Statement - Past
(Rs. mn.)
Opening Cash Balance
1999-2000
2000-2001
2001-02 Q1-3
1257
1658
695
1574
2319
265
Increase in Loan Funds
-
-
600
Sale of Fixed Assets
-
-
158
1574
2319
1023
789
94
15
-469
1038
1433
Purchase of Fixed Assets
595
738
-
Purchase of Investments
-
830
0
258
582
-
1173
3282
1448
401
(963)
(435)
1658
695
260
Sources
Net Cash Accruals
Total
Uses
Decrease in Loan Funds
Inc./(Dec.) in Net Working Capital
Dividend paid
Total
Surplus/(Deficit)
Closing Cash Balance
Key Ratios
Ratio
1998-99
1999-2000
2000-01
Current Ratio
2.18
1.53
2.14
Debt:Equity
0.09
0.01
0.00
RONW (%)
7.79
8.66
14.58
ROCE (%)
14.97
20.01
26.33
BVPS (Rs.)
23.19
24.72
27.46
EPS (Rs.)
1.81
2.14
4.00
Dividend (%)
4.25
5.5
12.5
Realisations – 2000-01
Tonnage of Zn-Pb
182,932
Rs. mn.
Realisation (incl. Other income)
Variable Costs
%
14,634
79,998
100.00%
Raw Materials
2,278
12,451
15.56%
Power & fuel
2,628
14,368
17.96%
109
597
0.75%
Total
5,015
27,416
34.27%
Contribution
9,619
52,582
65.73%
Salaries & Wages
2,790
15,254
19.07%
Other fixed expenses
3,394
18,555
23.19%
Total
6,185
33,809
42.26%
11,200
61,225
76.53%
3,434
18,773
23.47%
577
3,156
3.95%
25
135
0.17%
PBT
2,832
15,481
19.35%
Tax provision
1,130
6,177
7.72%
PAT (incl. Prior items)
1,692
9,250
11.56%
Net Cash Accruals
2,279
12,460
15.58%
Other factory expenses
Fixed Costs
Rs./MT
Total Expenditure
PBDIT
Depreciation
Interest
Realisations – 31.12.2001
Tonnage of Zn-Pb
161,535
Rs. mn.
Rs./MT
%
Realisation (incl. Other income)
9,882
61,172.55
100.00%
Variable Costs
4,243
26,266.32
42.94%
Contribution
5,639
34,906.23
57.06%
Salaries & Wages
2,265
14,020.24
22.92%
Other fixed expenses
1,964
12,161.32
19.88%
Fixed Costs
4,229
26,181.56
42.80%
Total Expenditure
8,472
52,447.88
85.74%
PBDIT
1,409
8,724.67
14.26%
Depreciation
459
2,840.87
4.64%
Interest
168
1,038.17
1.70%
PBT
289
1,789.33
2.93%
Tax provision
494
3,056.30
5.00%
PAT
211
1,308.08
2.14%
Net Cash Accruals
959
5,938.28
9.71%
Unit-wise Profitability
MINES
Zawar
SMELTERS
RD
RA
Debari
Vizag
Chanderiya
Employees
Workmen
1822
1201
606
1022
898
631
Executives
180
113
110
100
117
184
Base Production (T)
Zn Concentrate
43,457
Cash profit (Rs. mn.)
-127.78
36,091
Zn Metal
306,052
57,000
37,000
86,000
-170.06 1,014.02
210.01
189.52
1,027.58
Pb Concentrate
Pb Metal
17,605
7,799
18,325
33,000
Cash profit (Rs. mn.)
73.24
22.96
164.12
220.92
Total Cash Profit (Rs.
mn.)
-54.53
-147.11 1,178.14
210.01
189.52
1,248.50
Unit-wise Profitability
MINES
Zawar
Production with capex
(T)
RD
RA
Debari
Zn Concentrate
54,322
Cash profit (Rs. mn.)
SMELTERS
-103.26
57,745
Vizag
Chanderiya
Zn Metal
306,052
57,000
37,000
86,000
-179.93 1,014.02
210.01
189.52
1,027.58
Pb Concentrate
Pb Metal
22,007
12,478
18,325
33,000
Cash profit (Rs. mn.)
101.36
36.73
164.12
220.92
Total Cash Profit (Rs.
mn.)
-1.90
VRS Cost (Rs. mn.)
1,591.5
-143.20 1,178.14
210.01
189.52
1,248.50
1,042.0
Production of RD & Zawar mines can be substituted by increasing RA
production from 18 lakh tonnes to 23 lakh tonnes
Zinc Industry
Major World Capacities – Refined Zinc
COMPANY
Pasminco
Korea Zinc
Union Miniere
Cominco
Asturiana (now with Xstrata)
Glencore
Falconbridge
Noranda
Mitsui
Outokumpu
Metaleurope
Industrias Penoles
MIM
Hindustan Zinc
Zinc Corp America
Norzink
Grupo Mexico
MG
Padaeng
Anglo American
CAPACITY (MT)
656,000
628,000
476,000
391,000
335,000
307,000
245,000
244,000
239,000
225,000
224,000
220,000
174,000
169,000
148,000
143,000
105,000
100,000
95,000
85,000
5,209,000
%
12.59%
12.06%
9.14%
7.51%
6.43%
5.89%
4.70%
4.68%
4.59%
4.32%
4.30%
4.22%
3.34%
3.24%
2.84%
2.75%
2.02%
1.92%
1.82%
1.63%
100.00%
Consumption Pattern
8%
9%
49%
14%
20%
Galvanizing
Brass & Bronze
Zinc Alloys
Chemicals
Semi-manufactures
Current Global Scenario
• USA is the single largest consumer of Zinc ( 1.6 mn.
tonnes)
• Europe is the single largest continent which consumes
Zinc ( 2.3 mn. tonnes)
• World Production has grown by 6.4% in 2000 and
2.4% (in 2001)
• World Zinc Consumption which grew by 6.3% in 2000
has reduced by 1.1% in 2001
• Zinc prices continue to slide. In real terms, the lowest
level since the early 1940s
Dec-01
Aug-01
Apr-01
Dec-00
Aug-00
Apr-00
Dec-99
Aug-99
Apr-99
Dec-98
Aug-98
Apr-98
Dec-97
Aug-97
Apr-97
Dec-96
Aug-96
Apr-96
Dec-95
Aug-95
Apr-95
LME Price Progression - Zn
(US$/ ton)
1800
1600
1400
1200
1000
800
(US$/ ton)
600
400
200
0
LME Prices (Current Levels)
• Cash
=
• 18 mth Forward =
• 27 mth Forward =
$ 813 / MT
$ 883 / MT
$ 913 / MT
Current Indian Scenario
• Zinc consumption in India higher compared to
production
• 70% met internally, rest imported
• Lower per capita consumption implies potential for
growth (0.24 kg compared to 0.8 kg in Brazil and 4 kg
in USA)
• HZL & Binani Zinc, the only domestic producers, with
HZL being around 6 times the size of Binani
Zinc - Production in India
150
145.796
148.092
111.149
100
29.923
29.162
28.321
50
31.175
75
29.273
25
BZL
HZL
2000-01
1999-00
1998-99
1997-98
0
1996-97
'000 tonnes
125
136.271
141.806
Expected Global Scenario
• Demand for Zinc is expected to remain stagnant
• LME price to remain depressed in the short-term due to
surplus production and stocks
• Future Outlook bright
2002
2003
2004
2005
Consumption (tonnes)
9,025,000
9,408,000
9,663,000
9,927,000
Supply (tonnes)
9,400,000
9,625,000
9,770,000
9,943,000
375,000
217,000
107,000
16,000
900
1050
1100
1150
Supply/Demand Balance (tonnes)
LME Cash ($/tonne)
Source: Barclays Capital
Expected Indian Scenario
• Indian Zinc demand expected to remain in line with the
economy though in the future it is expected to increase
due to infrastructural projects taking shape.
• Supply-demand scenario unlikely to affect production
unless domestic prices continue to fall, in line with
LME price
Overall Assessment of Investment
Investment Perspective
• Strengths
 Track record of profit making
 Ore grade in Rajpura Dariba and Rampura Agucha
mines fairly high compared to grades available
internationally
 The Company has sites where preliminary exploration
work has commenced and indicates quality reserves
 The Rampura Agucha mine has substantial reserves of
high quality and the cost of mining is also low
 Debt-free company
Investment Perspective
• Strengths
 Has net working capital exceeding Rs. 4000 mn.
 Assets are available when Zinc LME at historical low
 Reasonably professional management with fair
commercial orientation
 Conservative accounting practices maintained
• Unforeseen liability unlikely – write-backs possible
 Huge other properties in terms of offices, residential
premises/housing colonies
 The staff members have not exhibited any overt signs of
hostility towards the process of privatisation
Investment Perspective
• Concern Areas




Zinc industry highly dependent on steel industry
Demand forecast for Zn not encouraging
Scattered locations of mines and smelters
Analysis of cost structures reveals that only RA mine is
viable at current LME levels
 Profitability of the company sensitive to changes in
import duty structure (reduction) or fall in world prices
 Quality of rock at the RD mine
 The availability of water in Rajasthan dependent on
annual rainfall.
Investment Perspective
• Concern Areas
 Power costs are high
 Salaries and wages is a large component of the total costs
 Sargipalli and Maton mines are being closed. The nonVRS costs of the closure, if any, would need to be
examined in detail. Agnigundala mine and Tundoo
smelter are also in the process of being closed. The
closure costs of these have to be examined.
 Company produces significant amount of PW grade zinc
which has low demand and lower margins
 Company’s equity base is very high
Assumptions Underlying Future
Projections and Valuation
Assumptions
• Production – Based on capacity
• Pricing
 LME-based, landed cost
 Insurance & Freight etc is assumed at USD 30/t
 Import Duty Structure as below
Rate (%)
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
35
25
25
20
20
20
20
 Clearance and domestic costs have been assumed at Rs. 1500/t
 CVD and SADD assumed at flat 16% and 4% respectively in the
calculation of effective duty
 INR to depreciate at 5% p.a. against the USD
Assumptions
• Costs – Projections based on historical reference.
Reductions assumed where applicable
• Interest at 11% p.a. in case of any loan in future
• Balance Sheet items linked to P&L, Actuals or Levels of
previous year as appropriate
• Projections over a 7-year period with cash flows to
perpetuity from the 8th year at 2% growth rate
Valuation
Valuation
•
•
•
•
•
Book Value
Discounted Cash Flows
Comparable multiples
Market Price
Other qualitative factors
 Intangibles
 Contingent and hidden liabilities
DCF Valuation
• DCF Valuation Parameters





Risk free rate
Market rate of return
Stock Beta
Growth rate to perpetuity
Cost of Equity
=
=
=
=
=
8.00%
14.39%
1.2 (or 120%)
2.00%
15.67%
Transaction Details
Shareholding on offer
• GoI disinvestment in HZL – 26%
• Open offer to be made subsequent to acquisition of
GoI stake – Minimum 20%
• Buyer’s Call Option: 6 months from Closing Date for
a period of 1 year - Upto 18.92%
• GoI’s Put Option: 30 months from Closing Date for a
period of 1 year – Upto GoI stake of 26%
• Buyer’s Second Call Option: 5 years from Closing
Date – All remaining GoI shares
Share Purchase Agreement
1. Non-disposal Undertaking of 3 years
2. Lock-in of shares for 3 years
3. Subsequent to successful bid, Open Offer for a
minimum of 20% stake mandatory
4. Buyer’s Call Option - 6 months after closing date upto
18 months (Upto 18.92%). {at higher of Bid Price or
Market Value}
5. GoI’s Put Option - 30 months after closing date upto
42 months (GOI retaining stake of 26 % to 31%). {at
the higher of Bid Price or Market Value}
Critical clauses in the Agreements…
6. SP Second Call Option – 5 years after closing date –
all remaining shares of GoI {Fair Market Value as
determined by independent valuer}
7. “Right of First Refusal” continues between SP & GoI
for 18 months from closing date
8. No Tag-along or Drag-along clause
9. Post Closing adjustment removed. (Existing in
BALCO)
10. GoI’s right to inspect accounts removed
Critical clauses in the Agreements…
11. Embargo on further Capitalization for 2 years*
12. Only the items requiring 75% majority are listed as
veto rights under the SHA
13. GoI has reserved the right to offer 5% of the Shares
to HZL employees directly
* (except with the consent of the GoI)
Future Projections
Profitability Projections
Rs. mn.
2001-02
2002-03
2003-04
2004-05
H1 – 880
H2 – 765
800
850
900
218,000
218,000
218,000
219,000
12,619
11,961
13,511
15,170
292
150
150
150
Total Income
12,911
12,111
13,661
15,320
Total Expenditure
11,082
11,439
11,996
12,802
1,829
672
1,665
2,518
687
717
758
771
28
0
0
0
Other Liabilities
139
0
0
0
VRS Amortised
289
405
405
405
PBT
685
-449
502
1,342
PAT
508
-449
464
825
LME Price of Zn SHG
($/t)
Tonnage of Pb-Zn
Net Sales
Other Income
EBITDA
Depreciation
Interest
Profitability Projections
Rs. mn.
PBDIT / Sales
2001-02
2002-03
2003-04
2004-05
14.16%
5.55%
12.19%
16.44%
3.94%
-3.71%
3.39%
5.39%
1.20
-1.06
1.10
1.95
1,484
672
1,627
2,001
RONW
4.36%
-3.85%
3.82%
6.37%
ROCE
5.58%
-3.85%
3.82%
6.37%
PAT / Sales
EPS (Rs.)
Net Cash Accruals (Rs. mn.)
Balance Sheet Projections
Particulars
(Rs. mn.)
31.3.2002
31.3.2003
31.3.2004
31.3.2005
Share Capital
4,225
4,225
4,225
4,225
Reserves & Surplus
7,886
7,436
7,900
8,725
0
0
0
0
14,887
15,547
16,207
16,407
Net Fixed Assets
6,395
6,339
6,240
5,669
Current Assets
6,737
6,106
7,134
9,023
Current Liabilities
3,008
2,943
3,004
3,092
0
0
0
0
2.45
2.52
2.36
2.65
Loans
Gross Fixed Assets
D:E Ratio
Current Ratio
Cashflow Projections
Particulars (Rs. mn.)
Opening Balance
2001-02
2002-03
2004-05
2005-06
695
5
633
1,557
1,829
672
1,665
2,518
0
0
0
0
409
658
0
0
2,238
1,330
1,665
2,518
440
660
660
200
0
0
144
179
57
0
0
0
1,445
578
0
0
926
0
39
517
Total
2,868
1,238
843
896
Surplus/(Deficit)
(630)
92
822
1,622
Closing Balance
65.00
157.00
979.00
2,601.00
Sources of Funds
Funds from operations
Inc. in term loans
Dec. in NWC
Total
Use of Funds
Inc. in Fixed Assets
Inc. in NWC
Dec. in term loans
VRS Payments
Other Payments
Cost Structures
RD Mines – Cost Structure
9%
Salaries & Wages
5%
Power
5%
38%
6%
Royalty
Stores
R&M
Depreciation
12%
Others
Admn. Expenses
8%
17%
Zawar Mines – Cost Structure
6%
6%
Salaries & Wages
3%
Power
Royalty
8%
46%
5%
Stores
R&M
Depreciation
8%
Others
Admn. Expenses
18%
RA Mines – Cost Structure
0% 4%
8%
7%
Salaries & Wages
7%
18%
Power
Royalty
Stores
R&M
Depreciation
27%
Others
29%
Admn. Expenses
Debari Smelter – Cost Structure
4%
0% 4%
Power & Fuel
9%
35%
Feed Material
3%
Stores & Chemicals
Salaries & Wages
R&M
Depreciation
Others
45%
Vizag Smelter – Cost Structure
7%
1%
5%
Power & Fuel
28%
Feed Material
15%
Stores & Chemicals
Salaries & Wages
R&M
4%
Depreciation
Others
40%
Chanderiya Smelter – Zn Cost Structure
5%
6%
23%
Power & Fuel
5%
Feed Material
5%
Stores & Chemicals
Salaries & Wages
13%
R&M
Depreciation
Others
43%
Chanderiya Smelter – Pb Cost Structure
4%
6%
21%
5%
Power & Fuel
Feed Material
4%
Stores & Chemicals
9%
Salaries & Wages
R&M
Depreciation
Others
51%
Tundoo Smelter – Cost Structure
7%
5%
1%
2%
Power & Fuel
Feed Material
Stores & Chemicals
42%
33%
Salaries & Wages
R&M
Depreciation
Others
10%
Comparable Multiples
COMPANY
EV / EBITDA
PRICE / BV
2002
Pasminco
1.60
0.10
Falconbridge
5.40
1.00
Penoles
4.20
0.50
Teck Cominco
5.10
0.70
Noranda
4.40
0.80
Xstrata
6.50
1.00
MIM
5.10
0.70
10.70
0.50
5.38
0.66
16.53
18.61
Grupo Mexico
Average
HZL Value (Rs. / Share)
Share Values
•
•
•
–
–
–
Book Value (31.3.2001)
Book Value (30.9.2001)
Market Price as per SEBI Guidelines
(Rs. / Share)
Full Equity
(@ 15.47%)
Rs. 25.46
Rs. 27.06
Rs. 18.39
D:E = 1
WACC =
12.94%
D:E = 1.5
WACC =
13.26%
Fully
Levered
11%
1) LME plateau at $900/t
18.07
19.73
20.18
22.69
2) LME plateau at $1000/t
27.41
30.10
30.83
34.91
3) LME constant at $765/t
2.13
2.29
2.33
2.59
4) 1 + VRS for 2118 people
19.78
21.66
22.18
25.02
5) 1 + closure of condemned units
19.05
20.83
21.32
24.02
6) RA Mine + 3 Smelters
21.70
23.72
24.27
27.31
7) RA Mine+Chanderiya&Debari Smelters
20.90
22.84
23.37
26.30
8) RA Mine+Chanderiya&Vizag Smelters
20.75
22.69
23.22
26.15
9) RA Mine + Chanderiya only
20.51
22.44
22.96
25.88
10) LME at $750/t, Rupee dep. @ 3%,
import duty 35/25/20/15/10, COP/t to reduce
to Rs. 50,000/Rs. 45,000
15.61
17.08
17.48
19.70
Past Financial Analysis
Strategic Perspective
• Sterlite’s presence in non-ferrous metals
 Copper – Originally present
 Aluminium – Acquisition of BALCO
 Gold – Prospecting in Armenia
Zinc – Natural extension of presence in the non-ferrous area
• Zinc industry less volatile than those of Copper and
Aluminium