The Economy is staring at a high degree of uncertainty, but Hindustan Zinc Ltd. (HZL) has posted strong numbers on the back of a strong demand environment in the domestic market as well as internal efficiency enhancements. Akhilesh Joshi, CEO & Whole Time Director, Hindustan Zinc Ltd., discusses the company’s outlook with Virat Bahri of B&E
B&E: On an year on year basis, Hindustan Zinc Ltd. has grown its zinc, lead and silver production by 6%, 56% and 35% respectively in FY 2011-12. How do you find the domestic demand environment currently for these commodities and what is the scope ahead?
Akhilesh Joshi (AJ): Developing countries, including India, will continue to outpace the rest of the world on the back of urbanization, infrastructure development, automotive industry growth and increase in the usage of coated steel. India, being a high growth-high demand market, is among the lowest ranks globally in terms of per capita consumption of zinc and therefore, the demand potential holds a lot of promise. Also, the global outlook for the zinc market is expected to be positive with the demand-supply gap expected to progressively widen on supply shortfall and robust consumption growth. Consequently, zinc prices are projected to be in a secular uptrend.
Growth in lead metal demand, similarly, is expected to be strong; driven by growth in replacement battery demand & the automobile market. India, along with the other BRIC countries, has become a sought after manufacturing hub for major OEMs. For the coming years as well, the lead market is expected to be strong; keeping in line with the growth in demand and the current supply-demand gap from the primary source within the country.
Indian demand for silver, in turn, increased by 12% to around 3,550 tonnes in FY 2012, as compared to the previous year. Indian silver demand is expected to grow further on the back of prospective growth in industrial segments and with silver becoming a preferred investment asset along with gold.
B&E: HZL posted revenue of Rs.114.05 billion (yoy growth of 14%) last year and net profits of Rs.55.26 billion (yoy growth of 13%). What critical challenges did HZL have to face during the fiscal with respect to maintaining bottomline growth?
AJ: Significant increase in input commodity prices has been one of the main challenges. However, we have more than offset the impact of increase in COP and have had a double-digit growth in profitability on the back of strong volume growth, improved silver prices as well as operational efficiencies.
B&E: The Indian economy posted a sub-7% growth in GDP in the previous fiscal, which has disappointed global investors. How does this slowdown in the economy affect your strategic direction? How do you expect to ensure continued growth in this scenario in the current fiscal?
AJ: Our world-class assets, cost effective operations, strong growth pipeline & strong liquidity position provide the backbone to our business and ensure our profitability & sustainability. We had done significant organic investment even during the global economic meltdown in 2008, since we believe that a slowdown in the economy is in fact the correct time for building an asset-base. We therefore continue to make investments in our business and also pursue aggressive greenfield & brownfield exploration. In the current fiscal, our revenue growth will basically be driven by the volume ramp up from our newly added lead-silver capacities.
B&E: On an year on year basis, Hindustan Zinc Ltd. has grown its zinc, lead and silver production by 6%, 56% and 35% respectively in FY 2011-12. How do you find the domestic demand environment currently for these commodities and what is the scope ahead?
Akhilesh Joshi (AJ): Developing countries, including India, will continue to outpace the rest of the world on the back of urbanization, infrastructure development, automotive industry growth and increase in the usage of coated steel. India, being a high growth-high demand market, is among the lowest ranks globally in terms of per capita consumption of zinc and therefore, the demand potential holds a lot of promise. Also, the global outlook for the zinc market is expected to be positive with the demand-supply gap expected to progressively widen on supply shortfall and robust consumption growth. Consequently, zinc prices are projected to be in a secular uptrend.
Growth in lead metal demand, similarly, is expected to be strong; driven by growth in replacement battery demand & the automobile market. India, along with the other BRIC countries, has become a sought after manufacturing hub for major OEMs. For the coming years as well, the lead market is expected to be strong; keeping in line with the growth in demand and the current supply-demand gap from the primary source within the country.
Indian demand for silver, in turn, increased by 12% to around 3,550 tonnes in FY 2012, as compared to the previous year. Indian silver demand is expected to grow further on the back of prospective growth in industrial segments and with silver becoming a preferred investment asset along with gold.
B&E: HZL posted revenue of Rs.114.05 billion (yoy growth of 14%) last year and net profits of Rs.55.26 billion (yoy growth of 13%). What critical challenges did HZL have to face during the fiscal with respect to maintaining bottomline growth?
AJ: Significant increase in input commodity prices has been one of the main challenges. However, we have more than offset the impact of increase in COP and have had a double-digit growth in profitability on the back of strong volume growth, improved silver prices as well as operational efficiencies.
B&E: The Indian economy posted a sub-7% growth in GDP in the previous fiscal, which has disappointed global investors. How does this slowdown in the economy affect your strategic direction? How do you expect to ensure continued growth in this scenario in the current fiscal?
AJ: Our world-class assets, cost effective operations, strong growth pipeline & strong liquidity position provide the backbone to our business and ensure our profitability & sustainability. We had done significant organic investment even during the global economic meltdown in 2008, since we believe that a slowdown in the economy is in fact the correct time for building an asset-base. We therefore continue to make investments in our business and also pursue aggressive greenfield & brownfield exploration. In the current fiscal, our revenue growth will basically be driven by the volume ramp up from our newly added lead-silver capacities.
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