Hindustan Zinc should be an investor’s dream. It controls nearly eighty percent of India’s zinc production, enjoys some of the lowest operating costs in the global metals market, and has massive reserves and expansion plans. Its role is even more important today as India pushes for energy transition and green infrastructure. Zinc is a key ingredient in galvanised steel, essential for construction and renewable energy. Silver, which Hindustan Zinc also produces in large quantities, is vital for solar panels and electric vehicles. But despite this clear strategic importance and impressive fundamentals, the company’s stock has remained stagnant. That disconnect has little to do with how much metal it mines and everything to do with how it manages its money, its governance, and its long-term strategy.
In recent years, Hindustan Zinc has started behaving more like a dividend machine than a growth-focused business. Last year alone, it paid out more in dividends than it earned in net profit. To fund these payouts, the company actually took on debt. It ended the financial year with over six thousand crore rupees in net debt, despite being a cash-rich company just a year earlier. This would be concerning for any company, but for Hindustan Zinc, it is especially worrying because of its expansion ambitions. The company has just committed to a twelve thousand crore rupee investment to double its capacity by the end of the decade. But with most cash flowing out to shareholders, and especially to its promoter Vedanta, that expansion looks more like a bold dream than a bankable plan.
The bigger issue here is the lack of alignment between what the company should be doing and what it is being used for. While shareholders expect value creation and growth, the promoter’s focus seems to be on extracting liquidity through dividends to support other group obligations. This has led to a series of governance concerns. One of the biggest controversies recently was the alleged brand fee arrangement between Hindustan Zinc and Vedanta. According to reports, Hindustan Zinc agreed to pay Vedanta for using its brand without getting proper government approval. The government still owns twenty-eight percent in the company and any violation of the shareholder agreement can trigger serious consequences, including a forced sale of shares. Add to this past controversies like Vedanta’s blocked attempt to sell its global zinc assets to Hindustan Zinc, and investor trust begins to erode.
This is unfortunate because Hindustan Zinc’s core operations remain extremely strong. The company reported over ten thousand crore rupees in net profit last year, has EBITDA margins above fifty percent, and continues to produce metal at costs lower than global peers. Its Q4 results were especially solid, with revenue growth, record low production costs, and signs of strong volume momentum. With the right capital discipline, Hindustan Zinc could easily fund its expansion plan from internal accruals. In fact, projections suggest that over the next five years, the company could generate over fifty thousand crore rupees in free cash flow before any expansion. That would be more than enough to invest in growth, repay debt, and return value to shareholders if managed wisely.
But that is the key question. Can the company change its approach? Can it move away from excessive dividends and toward long-term investment? Can it rebuild investor confidence by ensuring stronger board independence, transparent decision-making, and a clear capital allocation policy? These are not financial questions. They are questions of management philosophy and corporate governance.
As India’s energy needs grow, and demand for metals like zinc and silver increases, companies like Hindustan Zinc have a once-in-a-generation opportunity to lead from the front. But leadership requires more than technical excellence. It needs vision, discipline, and above all, trust. Unless Hindustan Zinc addresses these internal issues, it risks being treated by the market not as a high-growth leader but as a stable dividend-paying bond.
In a country full of potential, where industrial champions are emerging across sectors, Hindustan Zinc could be the metals sector’s answer to strategic excellence. But for that, it must first stop playing defense and start playing for the future.
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