US-based Viceroy Analysis has alleged that Hindustan Zinc Ltd (HZL), belonging to the Vedanta group led by Anil Agarwal, has paid out much more in dividends than it earned, purportedly borrowing to make up the shortfall.
The analysis home has estimated a shortfall in free money circulation (FCF) of HZL — as soon as a public sector agency — within the first quarter ended June 2025 to be round Rs 3,600 crore ($371m). “HZL CFO Sandeep Modi’s “Rs 10,000 crore ($1.17b) free money circulation” declare collapses below scrutiny. Money flows are backed by debt. If HZL’s dividend stays the identical as final yr, we estimate HZL will incur an annual FCF shortfall of at the very least Rs 5,000 crore ($580m) and should be funded by extra debt,” it stated.
When contacted, HZL spokesperson stated. “the Viceroy report is a mixture of selective misinformation and baseless allegations. All resolutions are detailed and a part of Board undertakings that are taken to them after rigorous due diligence. Previously 20 years the corporate’s zinc manufacturing capability has grown greater than 4 instances and silver by 20 instances.”
“Hindustan Zinc is steered by way of a stringent governance framework whereby all issues are taken to the Board and this course of is adopted for all proposals,” HZL stated.
Viceroy alleged that HZL has not generated Rs 10,000 crore in FCF since 2023, at which level FCF has fallen sequentially. On an annualized run charge: we anticipate HZL FCF at Rs 7,000 crore. In FY 23, throughout a brief commodities rally submit covid, HZL generated Rs 12,000 crore FCF, and paid Rs 31,000 crore in dividends, accruing an unlimited deficit. Leverage elevated sharply vs Q1 2024, with the debt-equity ratio rising from 0.8x to 1.2x.
FCF represents the amount of money a enterprise generates after accounting for capital expenditures wanted to take care of or develop its asset base. In easier phrases, it’s the money left over after an organization pays for its working bills and investments in tools, property, or different belongings.
Vedanta acquired HZL from the federal government in 2002.
Disclosures counsel HZL incurred Rs 2,000 crore ($232m) of recent debt within the June quarter of FY26. HZL’s auditor, SR Batliboi, failed to analyze materials considerations, relying totally on administration assertions whereas the corporate’s capital base deteriorated and governance collapsed, Viceroy alleged.
Story continues under this advert
HZL spokesperson stated it has turn out to be the world’s largest built-in zinc producer and is amongst the highest 5 major silver producers. “It has created immense stakeholder worth by way of improve in market cap by greater than 500 instances, along with dividends to shareholders and exchequer contribution. HZL contributes almost 35 p.c of the declared dividend to the federal government treasury, together with dividend to authorities and tax deducted at supply (TDS),” he stated.
In keeping with HZL, this quarter amidst commodity headwinds the corporate delivered past market expectations and registered document excessive first quarter mined metallic manufacturing and lowest price of manufacturing. In FY25, the corporate clocked its second-best revenue, up 33% YoY. Hindustan Zinc’s financial institution amenities and debt programmes are Crisil AAA rated highlighting our environment friendly & built-in operations, and robust monetary danger profile. And this constant efficiency displays the rising belief of our stakeholders, HZL stated.
The analysis agency additionally questioned the model charges paid out by HZL. Within the earnings name, HZL’s CEO Arun Misra “credited offshore model charges (paid prematurely) as justifiable by previous “dangers” undertaken by Vedanta as a shareholder of HZL. That is preposterous,” the analysis agency stated.
“HZL CEO Arun Misra’s protection of the controversial 3 per cent model charge, a charge that ends in a whole lot of crores in annual funds to VRL (Vedanta Assets), was the centrepiece of his narrative through the Q1FY26 Earnings Name,” the US agency stated.
Story continues under this advert
“We reiterate our perception that this “model charge” is an uncommercial contract with VEDL (Vedanta Ltd), who doesn’t seem to supply any model, administration, or different auxiliary companies to HZL. There are not any staff or substantial operations at VRL to justify model charge funds,” Viceroy stated.
“Vedanta’s shares in HZL bear the identical danger as each different fairness holder, together with the federal government of India. If something, it’s the non-promoter shareholders which have borne the outsized danger of HZL taking outsized loans to bail out promoters,” it alleged.
HZL stated “Vedanta” is a outstanding international model within the pure sources sector and the model is a registered mental property of Vedanta Assets. “HZL and different group firms use the model below a model license/sub-license settlement and pay a Board-approved model and strategic companies charge for its utilization. This construction displays a regular intercompany licensing mannequin used globally by diversified teams and is absolutely compliant with Indian accounting, tax and governance laws, and follows internationally accepted practices,” HZL spokesperson stated.