Hindustan Zinc Ltd
NSE:HINDZINC
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Hindustan Zinc Ltd
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Ladies and gentlemen, good day and welcome to Hindustan Zinc Limited Third Quarter FY 2023 Earnings Conference Call. [Operator Instructions].I now hand the conference over to Ms. Jhalak Rastogi, Associate Director, Investor Relations. Thank you and over to you Ms. Rastogi.
Thank you. Good evening, everyone. I welcome you all to Hindustan Zinc's third quarter and 9 months ending 31st December, '22 results briefing. On behalf of Hindustan Zinc, I wish you and your family a very happy new year 2023. In this call, we will refer to Q3 FY '23 Investor presentation available on our company's website. Some of the information on this call may be forward-looking in nature and is covered by the Safe Harbor language on Slide #2 of the set presentation.Today on the call we have with us our CEO, Mr. Arun Misra and our Deputy and Interim CFO, Mr. Sandeep Modi. Mr. Misra will begin with an update on business performance, while Mr. Modi will walk you through financial performance, after which, we'll open the floor for questions.I now request Mr. Misra to begin today's call. Over to you, sir.
Thank you, Jhalak. A very good evening to all of you. First of all, I would like to wish you and your family a very happy new year 2023. Thank you for joining us today for the third quarter and 9 months of FY '23 results briefing. This quarter, the key themes and highlights remain sustainability and community at Hindustan Zinc. Mentioning a few of the initiatives during the quarter Zinc family participated in Run for Zero Hunger Vedanta Delhi and Pink City Half Marathon, rolled out an electric vehicle policy for the employees under evolving for good initiative, successfully organized 6th edition of Vedanta Udaipur World Music Festival and hosted India's largest and first underground All India Mine Rescue Competition.And now we are thrilled to enter into the New Year and the last quarter of this financial year with great vigor, towering optimism and growing opportunities and fresh targets. Coming to our key priorities on safety front, we are extremely mindful and conscious of the fatalities happened during first half of FY '23 and the working committee have been regularly identifying critical areas requiring improvement to address potential risk and have been determined to provide support to our people wherever required.This quarter, it gives me satisfaction to report a fatality-free operations. Safety and people are the most important pillar and priority for us at Hindustan Zinc and it is our commitments and vision to ensure that all our employees return home safely. Zinc safety team continues to drive various projects and initiatives in order to meet our vision of eliminating fatalities and serious injuries. It is happening to see the efforts of entire Zinc leadership team fortifying.An update on our key priority. In ESG, in line with our commitment to net-zero by 2050, I'm happy to share that we have received Board approval to undertake another long-term captive renewable power delivery plan up to a capacity of 250 megawatt for a further investment up to INR430 crores. I'm also delighted to inform you that Hindustan Zinc has secured third place globally and first overall in Asia-Pacific at Standard & Poor's Global Corporate Sustainability Assessment score in metal and mining sector. We have been recognized as A minus category in climate change and water security in CBD 2022, a movement upwards from last year performance.In addition, power plants at Dariba smelting complex and Zawar received Platinum awards at [ Sate ] Excellence Awards 2022 in energy efficiency and best practices of industrial water management categories respectively. These recognitions play a significant role in motivating us to march ahead in our ESG journey. Coming to an update on our on-ground CSR activities, it gives me immense pride to inform you that Hindustan Zinc has been solicited with S&P Global Platts award and our 7 units have been bestowed with the 26th Bhamashah award reflecting our commitment for the remarkable work undertaken in the field of education related community development initiatives.These recognition of our continued commitment towards education gives a sense of satisfaction to each one of us. Our CSR team continues to strive towards making positive impact across area of fields and they are delivering on various initiatives and activities across the areas of education, sustainable livelihoods, women empowerment, health, community asset creation, and water and sports and culture through their well-rounded on ground efforts. Strengthening our commitment towards health of our local communities, Hindustan Zinc provided an oncology vehicle for early detection of various cancers to Rabindranath Tagore Medical Institution on its 60th foundation day.I would like to share that 2 of our zinc football players who got selected in the national camp. Also our football player smelter reduced in All India Football Federation Elite Under 17 Youth Cup with incredible wins over top Indian youth teams and the under 17 team of Zinc football player finished third in the 18th Edition of Administrator's Challenge Cup held in Chandigarh. Moving on to the market, overall picture remains similar to previous quarter [Technical Difficulty] following a modest rise in Chinese demand due to lead acid battery export.Coming to silver, prices witnessed an upside in the quarter and closed out at $23.95 per troy ounce. The supply side looks to be diminishing. Silver inventory is a 2-year low globally while output from mines has also been dropping continuously, making silver attractive for the medium term. Further, silver demand in the solar power sector is expected to continue to grow as in essence look to develop green energy. On the domestic front, the economic environment in India remains buoyant. The sentiment is buoyed by optimism then that demand will remain strong. This was reflected in S&P Global Manufacturing PMI in December 2022, which was at 57.8, indicative of expansion in the manufacturing activity.Further, the Indian economy is on track to achieve 6.8% to 7% GDP growth in the current fiscal and is in the better position to navigate global headwinds than other major emerging economies. With the anion budget coming in, government's focus is expected to remain on infrastructure development, which will see the consumption of zinc grow separately in 2023.Now turning to our third quarter results, starting with key highlights on Page 9. I am delighted to inform that Hindustan Zinc has delivered a record 9-month production with highest ever mined metal and refined metal. And with this run rate, we are fully geared to deliver another stellar performance this year. Mined metal for 9 months was up by 5.4% year-on-year and refined metal was up 7.9% year-on-year. With consistent MIC flow from mines and better plant availability, our volume delivery has been on the up curve and we are on the right track.The quarter performance on a consolidated basis was impacted by rising input costs, inflationary pressures and unfavorable macros. And amid these challenging macroeconomic environment, we delivered a strong EBITDA margin of 52%. We have also been up to speed in some key projects. For our fertilizer plant, we have locked in partner, roster and alloy plants are also in advanced stage.On strategic developments, I'm happy to share that the Board has approved the acquisition of THL Zinc Limited having zinc plants across South Africa and Namibia subject to receipt of requisite regulatory approval. This zinc assets have an R&R about 35 million tons, which is equivalent to that of Hindustan Zinc. This will help drive our growth inorganically by creating substantial synergies and unlocking values. I'm also happy to inform that Hindustan Zinc has now reach -- registered, which will enable us to penetrate the European market. We have started selling in Europe and considered it a good opportunity to expand our market bit farther.All this while, we continue to export to our neighborhood countries and Southeast Asia with continuous new developments and increased momentum in projects along with valuable learnings and some of the key structural changes that we have discussed over the last few quarters alongside increased use of technology as well as learning deployed. We are confident to deliver the projected volumes for FY '23 and move even beyond the same in coming years. Having said that, our production guidance for the fiscal year remains unchanged.With this, I hand over the call to Sandeep for an update on the financial performance. Thank you.
Thank you, Mr. Misra, and very good afternoon, everyone. Hindustan Zinc has delivered a record-setting operational and financial performance with highest ever 9 months revenue and EBITDA along with PAT and have delivered another set of strong results despite the global zinc and input commodity inflation. We have laid a strong foundation for this landmark year by achieving a significant milestone of historic high 9 months volume. The last few months has been the global economic grapple with inflation despite which we are strongly moving forward, demonstrating our determination and resilience. Our quarterly performance was better by operational efficiency initiatives and volume deliveries, keeping us ahead in this ever evolving and volatile business environment.Refer to Slide 16 for an update on our financial performance for the third quarter and 9 months ended December '22. For the first 9 months of FY '23, revenue from operations stood at INR25,589 crores, an improvement of 24% for the same period last year. This was supported by improved zinc LME and volume gains from strategic results, favorable exchange rates and better lead and silver volume, which was partially offset by lower lead and silver prices. Revenue from operation during the quarter was at INR7,866 crores, down by 2% Y-o-Y majorly on account of lower lead and silver prices, lower refined metal and silver volumes which was partially offset by favorable exchange rate and gains from strategic hedging.Sequentially, revenue decreased 6% primarily due to lower zinc prices, lower lead and silver volume and lower gains from strategic hedging, partially offset by favorable exchange rates, improved zinc volume and improved lead and silver prices. For the 9 months, the COP stood at $1,272 per ton, 14% higher Y-o-Y in USD term and 22% higher in INR terms. The COP was up mainly on account of elevated coal prices, poor domestic linkage coal availability, and input commodity inflation. It got partially offset by higher volume and improved operational efficiencies.Zinc cost of production before royalty during the quarter was $1,293 per ton, higher by 13% Y-o-Y and 3% sequentially. In INR terms, it was [ 24% ] Y-o-Y and 6% sequentially for the same reason. Further for quarter-on-quarter, it was higher on account of consumption of high price fuel inventory coinciding with lower asset prices and grid. The resulting EBITDA for 9 months of FY '23 was at INR13,382 crores, an increase of 19% Y-o-Y driven by improved metal and silver volumes, higher zinc LME prices and gains from strategic hedging and favorable exchange rates partially offset by higher costs and lower lead and silver prices.EBITDA for the quarter was INR83,717 crores, down 15% Y-o-Y and 15% sequentially observed. This movement was primarily driven by lower revenue due to zinc prices coinciding with increased cost on account of prevailing input commodity inflation environment. Please refer to EBITDA gird from Slide 18 to 20 for further details.Net profit for the 9 months FY '23 was INR7,928 crores, a growth of 18% Y-o-Y led by higher EBITDA marginally offset by increasing debt. Net profit for the quarter stood at INR2,156 crores, down 20% Y-o-Y and sequentially, majorly on account of lower EBITDA offset by lower tax expense. ETR for the third quarter was close to 32%. And if we see a 9-month, it will be approximately 33%. That said, our cash tax is much lower due to available net credit. Once you move to new tax regime for the next financial year, our tax rate will be around 25%. I'm happy to inform that Board has further approved a third interim dividend of INR13 per equity share amounting to rupees approximately INR5,500 crores. This reinforces our commitment of providing superior shareholder returns continuously.Entering Q4 '23 with softened coal index, we will increase optimism on coal availability. Domestically, we are confident on meeting our annual guidance and thereby maintaining our leadership in the global zinc cost curve. Further, as mentioned by Mr. Misra, with the new RE power tie-ups coming in, it will not only further improve the cost predictability, but will also contribute towards the improvement of cost structure in the longer term.With this, I now open the floor for your questions.
[Operator Instructions]. First question is from the line of Amit Dixit from ICICI Securities.
I have couple of questions. The first one is on the brand and the strategic management services to Vedanta that agreemented 2% of consolidated turnover. So just wanted to understand what was the need of this agreement at this point in time? And how will Vedanta contribute more meaningfully than it was already doing? And if you can highlight the broad contours of the agreement that would be great. Does it carry any escalation clause and all? So this is the first question.
So if you look at it, it is -- it was long overdue, not that which is received. At this point of time, we're beginning something. It is long overdue. We -- Hindustan Zinc has been benefiting from the association of Vedanta, not only as per the brand of Vedanta is concerned as a global resource company as well as various strategic services that it receives from Vedanta, including management assurance system services which is very comforting for all shareholders, while also all the growth trajectory of Hindustan Zinc has been always guided by the risk taking ability of Vedanta.So that, if you factor those 2 and also induction of more and more digital, more and more automation completely revamping the management structure ensuring various centrally guided management control systems, has taken Hindustan Zinc to the level at which we are operating today. And so this, in my opinion, was long overdue. We have got the approval today. And I think this is in line with the practices adopted there, most of the multinationals for bigger company where the units received strategic services and the benefit of association with the principal brand, which is the group is known for.
Is there any escalation clause also that this 2% can move to -- by certain bps after few years or something? If you can share some broad contour, the timeline of the agreement if there is any, that would be helpful.
So, Amit, this is Sandeep here. As of now, this is 2%. As and when anything Board approves, it will be -- we will come to you with more [ contour ] to you.
The second question is retention subscription of shares in THL Zinc. Now if I look at the conclusion that is being paid and the EBITDA that is affecting rates. It looks that it is better higher valuation compared to global peers. So while I understand the synergy part, I mean, but just wanted to understand that is the synergy -- and there would be any -- well, the synergy between the operations because you operate in different territories altogether. So just wanted to understand what kind of synergies we are looking at to pay a premium of according to my calculations and in the EBITDA works out 8.5x. So just wanted to understand it.
So right now, they are principally operating 1 underground mine and 1 big [ hands glove ] open pit mine. This has got a lot of the biggest open pit mines in the world with the zinc ore in it. And this is -- at this time we are entering almost equal. You can see the equivalence between what Hindustan Zinc was sometime around 2006-2007 or 2007-2008. So we have got resource for open cast mining for some more years while at the same time there are really good grade resource, which has to be developed in the manner of underground.And Hindustan Zinc which brings in the expertise of high volume underground mining in the most modern methodology and also Hindustan Zinc brings in which is the capability for concentration of the ore as well as smelting of ore, which will be the value addition to the property that we try to acquire. Together, the resource base of Hindustan Zinc gets doubled by this acquisition and also the potential of production capacity gets doubled up to 2 million ton with 1 million ton from India and 1 million ton from South Africa, 2 different geographies, but 2 having fully integrated operations which almost nobody has.And with this kind of capacity with independent markets wherein India will be on India, Southeast Asia, Africa would be more on the US and Europe territory or Middle East territory. So with that 2 together, we will be controlling a large part of global market. At the same time, we will be utilizing the capability that Hindustan Zinc has developed over last so many years of operation of concentrates and smelters and also Hindustan Zinc will help this new unit to transition into underground mining in a very safe and very productive manner. So if I look at it in other way, 35 -- almost 31 million tons resource base with Hindustan Zinc market cap of about [ $17 billion ], [ $18 billion ]. So we are similar resource base there and similar production potential is there. So that's why to me, it is strategically one of the best decisions that both would had taken.
Sir, just a comment. I mean, the potential was always there and there were challenges in developing this resource. Now paying a premium, paying the valuation 8.5 as I mentioned, looks little bit steep in my view. And while I understand the overall potential of these resource, but the -- but how much time you will take to kind of bring it online and the benefits basically onboard? Plus the premium part makes it a tad and comfortable in this.
So Amit, all factors were duly considered while taking this decision. Just to give better comfort, the current operations at that unit is about 300,000 tons of metal and concentrate production and they are -- and already the projects have been commissioned on the ground to double this capacity in next 2 years' time. And parallelly, we are working on the smelting capacity. So very soon, the capacity can be doubled at that case. And while we launch further projects to take it up to 1 million ton as has been the vision. And that's why I'm saying, it is at the inflection point, what we -- what Hindustan Zinc was sometime in 2006, '07, '08 or so when the new acquirer were planning for expansion of this mine, which was hardly at 1/9 or 1/10 of the capacity as it is standing today. Rest, all factors have been duly considered while doing the accrual.
[Operator Instructions] The next question is from the line of Pinakin Parekh from JPMorgan Chase.
I have 2 questions. My first question is given that it's a related party transaction, how will the government stake be considered when the voting comes? Is it a minority stake and hence they would have to approve the transactions or is their approval not required? I'm just trying to understand.
Your voice is not very clear. May I request to come in a better reception area please?
Am I audible now?
Yes.
So just how will the government stake be considered and have they given their inference for approval for the transaction?
We have the -- this is approved by the Board. And, of course, the Board approval follows approval or recommendations by the Audit Committee. And further for course of actions, all due approvals will be sought wherever required as per the law.
So the government nominees on the Board have approved the transaction. Would it be fair to say because the government nominees are there?
When we see board approval, we don't see individually which director opine work. But we can see overall, the Board has approved it.
And how does the Hindustan Zinc plan to fund this transaction? I mean, how much debt will the company be taking to fund this transaction?
So at this point of time, if you see the consideration has been -- the timeline of input is 18 months and it will be a too much [ entry ] this is the certain milestones. So I believe most of the transaction will get funded in the internal approval.
Next question is from the line of Prashant Kumar Kota from Emkay Global.
Sir, I would like to know more about this transaction. On a scale of 1 to 10, how confident are you in terms of getting back -- bringing these assets to the -- the assets being acquired to 1 million ton per annum output and to quartile one in the costs. So on a scale of 1 to 10, if you could express your confidence, that would be really helpful to us and the investors also.
So from my long 30 years' experience in mining and my -- since the time we moved this proposal to both some and the discussions that we had and my own personal involvement in due diligence, I can tell you apart from the factor -- apart from the factoring of 10% uncertainty, which is there in any mining project, I am absolutely 90% confident.
And sir secondly, you had spoken about the milestones being -- if you could kindly -- broadly briefly tell about what are the milestones and that has [ related from it ] apart from the regulatory approval of this.
So there are certain milestones like they have certain approvals, which are required from the government for certain tax exemptions kind of thing. So the deferment has been there on account of that. The deferred consideration would be payable with that. So there are certain milestones which we will do.
So the broad -- the deadline is 18 months, but do you think this will consummate within that or is it front-ended or back-ended if you could -- what do you think -- what's the best guess, sir?
Your voice is not clear. We could not understand. Could you repeat?
Prashant, may I request you to speak through the handset, please.
Sir, what is your best guess on the timing needed to consummate this particularly?
So, if you see, lead, basically it talks about the 18 months for completion of the commission which is like acquisition, regulatory approvals, payment to the trenches, the total 18 months have been put up. In the phase might have -- there would be a payment.
That is outer end. So if it is possible that it could be closed within let's say 12 months to get approval, sir?
We are expecting the shareholder approval by Feb end.
[Operator Instructions]. Next question is from the line of Rahul Jain from Systematix Group.
Sir, once again coming on the transaction, so what are the key assets over here in terms of size wise and what kind of any number on volumes you can throw, say, why up? What you can see 1 year after transaction or 5 years after transaction? I mean what kind of further investments would be required?
So there are 2, 3 things to be seen here. One, let me also give the strategy perspective. If Hindustan Zinc is to grow to 2 million ton with Indian resources, it is next to -- it is not possible because our current mines, if you look at the expansion programs altogether, will limit at around 1.2 million ton. But traditionally for last 5 years, we have been stagnating at around 1 million ton only. And for last about 2, 3 years, we have been following up. There has been no new zinc mine has been opened up or put up for auction in India. World over also, there is no more such properties of that such size which is available for acquisition.So in that case, this makes the right choice for Hindustan Zinc to grow. That's what I'd said in 2 different geographies. If the property wise if I look at it, it has got about 35 million ton plus R&R. Main properties are located in Gamsberg in South Africa and the Aggeneys in the North area in the Northern Cape and close to it is the original dips and [ Schwertberg ] mines and also it has brought in Skorpion Zinc in Namibia. These are the 3 biggest properties around with the -- all the ores and R&R is available. Today, their open cast mine is fully operational with 4 pits. Underground mine in both dips and Schwertberg are operational as around -- and around the expansion part.The Gamsberg mine where the 4 pits are already operational. So there altogether, we are producing about 300,000 tons of metal in concentrate and the projects are on just now as we speak for expansion of Gamsberg mine to take it to 600,000 tons in 2 years of time, doubling the capacity and also looking to put up a smelter in Gamsberg as well as restart the smelter in Namibia property, already has a smelter, little bit of modification has to be done. So those will be done through at both these capacities to convert 600,000 tons into metal. And then third phase of expansion will be by adding another 400,000 tons when you open up the underground property in Gamsberg and then get good grade ore which is there at the dip and add another 400,000 tons.
So today already we are doing about INR2,000 crore EBITDA in the zinc asset, is the right way to look at it?
Today -- for 9 months zinc asset we must be -- they are doing -- you are asking the currently one or you are asking for the future?
No, no, current in the sense, these assets that you say which you have elaborated, you already have...
I got it. So last year, they closed it at $206 million of EBITDA current -- of the FY '22, but currently looking at the run rate, we are going to do between $252 million to $300 million.
So how would you break up the acquisition cost in terms of the producing assets as well as the second -- the underdevelopment assets? So is there any split on this number, $3 billion?
So, their -- so total valuation considered all the aspects, you have to look at the -- it has a 35 million ton of the R&R. So we see the SRK certified report, we saw the 8 billion ton of approval reserve remaining in the major indicated inferred category. So we -- while the valuation has been done, while the value of all the relevant aspects has been taken into account. And, of course, we are focusing more on the various project and their growth. And obviously their cash flow will also have literally taken into account. We cannot look at only the historical EBITDA to follow...
No, I absolutely understand. My point is that in terms of the multiple that you would have given for the assets which are already existing and for assets which are under development, can you give a breakup of that?
I think just for the time, we would like to avoid. Just of the overall [indiscernible] million of the R&R, so 35 million ton of R&R for which we are deciding the...
You are saying -- say number of JT currently, you can reach to 600 and then what is the time -- what is the number in mind?
Overall 1 million ton is the number in mind, potentially another Hindustan Zinc
By 2027 or any -- what is the timeline?
By 2025, it will be 600,000 tons. And by 2027 or 2028, it will be 1 million ton.
And where would you place it in terms of the cost curve, where we are at Hindustan Zinc India? Was it be similar or...
Parallel to Hindustan Zinc costs curve around, at 1 million ton, it will be around $1,000 per ton.
Next question is from the line of Pallav Agarwal from Antique Stock Broking. We move on to the next participant. Next question is from the line of Sumangal Nevatia from Kotak Securities.
Just some clarification. I got disconnected in between. So the development of the management fees now being safe to Vedanta [Technical Difficulty]. And is there any shareholder or any other approval required for this decision?
So this matter does not fall into any scheduled shareholder agreement also. And as per the company that SEBI has ordered, it requires the Audit Committee and Board approval.
So what is the limit of transaction with related party that [ order ] shareholder approval?
So any shareholder approval required, if it is beyond the 5% of the term.
And this agreement has been signed for how long? I mean, when is the next revision if at all it has to happen?
So this agreement will be signed now after the Board approval.
And for what time period?
We will be signing for the 3 years.
Second, with respect to this acquisition of [ Winky Benetton ] I mean, they've mentioned the payouts will be staggered based on milestone. Just wanted to understand what sort of milestones are these? Are these operational, the volume related milestone or some other regulatory approval milestone?
So these are the largely regulatory approvals related to the milestones, but large of the -- bulk of the payment will go in the first -- in the next 3 to 6 months.
And shareholder approval, we are expecting in [Technical Difficulty].
So we are hopeful to get shareholder approval by February end.
And what are the other approvals apart from the shareholder approval that would be required?
I think this is a normal acquisition. It will require only shareholder approval to activate the transition. I don't think any further approvals required.
So -- but we still expect over 18 months payout. Is that the right understanding?
Because we have the deferred consideration, which has been considered. So that's why it has been written to 18 months.
And next year, we are expecting tax rate to be around 25%, right?
I think next year tax rate 25% and we will move to the new regime.
And just one last clarification. We are continuing with our full-year cost guidance and the volume guidance? Because this press release, it does not mention anything.
Of course, we are maintaining the same thing, the volume as Mr. Misra said, we have the right path and we should be in that range or may be marginally better. In terms of cost, as of now, it's like 9 months [indiscernible] and we are expecting in the Q4 with a -- lowering with a coal index and better putting the linkage coal availability. We should be in a much -- we should -- we are 100% confident we will be in the range which were given to the market for 12.25, to 12.75.
[Operator Instructions] Next question is from the line of Alok Deora from Motilal Oswal.
Sir, just if you could repeat what's the cost of production we are looking at for the fourth quarter and is that number actually...
So I think for the fourth quarter, we can't specify, but overall what market guidance we've given 12.25 to 12.75, we will be within that.
And also sir on the acquisition, so how much debt we are looking at or to take from the market for that? Because you mentioned in the press release of some external debt as well.
At this point of time, I did say, extremely the largely funded through the internal accrual as simply I gave the answer, when some another analyst asked. So it will be largely funded through the internal accruals. We're just putting as anything between.
And sir, just one more thing...
If you see on the overall balance sheet size, INR1,600 crore, INR482 crores there and we are having the Q4 cash flow will also be there, so -- and trenched will be there. So it means at the net debt level, we'll be obviously exceeding those numbers.
And sir just last question on this coal linkage, so how is the situation there now? What can be expected in Q4?
We have seen slight improvement in the coal linkage from quarter 3, but still not up to our satisfaction. We believe that from February onwards, we will get much -- that the indications are from the coal authorities that the linkage numbers are going to increase, number of rigs that we get per month. So Q4 numbers will be better than what it was in Q3. At the same time, our high costs stock of the imported coal is almost -- will be over the January end. February, March, we should be getting more of low cost imported goods, so we should get that benefit.
Just one actually follow-up question. Sir, so, with this acquisition, assuming it goes through. So next, say, 3 to 4 years, what kind of numbers we are looking at on the mining side? I mean, how much can we do with that? Because that ramp up everything which you were talking about, will take its own time. So any number for FY say 3 to 4 years down the line, we can look at?
Four years down the line, see Hindustan Zinc will stagnate at about 1.1 million ton metal level. And in 2 years' time, I should look at somewhere around 300 million -- 300,000 tons of current production, we will go to 600,000 tons in case of granite in their license. And in 4 years' time, they should be close to 1 million ton.
So combined 2 million could be achieved in 4 years' time.
Combined 2 million could be achieved.
The next question is from the line of Ritesh Shah from Investec.
First, congratulations for the master stroke. Sir, I just have a couple of queries. One is if I read at the press release right, basically it's an overseas entity transacting with a wholly-owned subsidiary, which is also overseas entity. So would it be fair to assume that there won't be an element of long-term capital gains tax?
No.
Sir second clarification, I think in one of the prior questions, it was asked that there is no majority of minority required? And you did indicate that it is not required? Did I hear it right?
Majority of minority will be required like the shareholder approval. We said shareholder approval is required. As per the SEBI law, since the related party transactions, we will require majority of the minority.
[Operator Instructions]. The next question is from the line of Kirtan Mehta from BOB Capital Markets.
I would want to go back to the transaction. In terms of the approvals, while you said that the shareholder approval is targeted in February. And at the same point of time, there is a deferred consideration which is linked to the regulatory milestones. So which are these regulatory approvals, which we envisage over 18 months? Could you elaborate more on this?
I think we are not talking about regulatory approvals of in India. We are taking certain regulatory approvals, which we -- the entity would require in their respective geographies. Once they receive it, then it will be paid to them.
So this is basically the approval in South Africa and Namibia related to transfer of ownership to another subsidiary? Is that..
Correct.
And then in terms of -- would you also sort of give us a pro forma net debt number, net cash number for Hindustan Zinc after completion of this transaction?
So if we see like $2.4 billion is immediate cash consideration and Hindustan Zinc is sitting as of now about INR16,500 crore. And in the Q4, whatever the number, I can't estimate and predict, but at this point of time if you say that given the performance which we have, we will be having -- we should be having a good amount of balance. And even after paying off this, we will be having a very good asset in our books. So net pro forma number is obviously when we purchase any asset, the cash will go, but at the same time, we'll get the asset which is not available globally at such kind of large 35 million ton R&R. So I will pay the cash and I will get the such a beautiful asset which we will add to the Hindustan Zinc and make Hindustan Zinc total almost 13% of the market share globally in the zinc and maybe #1 zinc producer company.
Next question is from the line of Ashish Kejriwal from Nuvama Institutional Equities.
Sir, just one clarification. In this transaction, whether government will be considered as minority or it's a part of the promoter group?
So, we are -- as of now, we have only got the Board approval and we will go for shareholder's approval and we will see it at that point of time. As of now, we are not making any opinion on such things, which are subject to legal opinion. And perhaps me and Sandeep are not in the best place to comment on such things.
And secondly, when you are saying that all money, this $2.9 billion, that will be paid to Vedanta only? Or there will be some infusion into zinc international also on account of this? This is entirely different from whatever CapEx we are talking about.
So if you understand the total valuation, it has been done on the DCF method for that and 20% of the payment is deferred. And majority payment will be paid immediately after the shareholder approval as I said. And the payment will go to obviously to the Vedanta Limited. And whatever the future projects are there, it will be like funded by Hindustan Zinc International as they will be having their own cash division, lot of projects are coming on the line.
And sir when you are talking about up to [ $2.98 billion ]?
Also note that entity is largely debt free entity. So we have got strong balance on their side also if drop happens [indiscernible] into their own business.
So, when you are talking about up to $2.98 billion, so what's the possibility of coming down or something because it's a fixed transaction? So is this somewhat variable attached to it?
So as I say $2.4 billion roughly is an immediate cash consideration and remaining $550 million is up to the milestone. When the milestones are achieved, that time it will be paid. So that's why you see the transaction timelines going to 18 months.
Ladies and gentlemen, that will be the last question for today. I now hand the conference over to Ms. Jhalak Rastogi for closing comments.
Thank you, everyone. With this, we close today's earnings call. For any follow-up questions or clarifications on the results, please feel free to reach out to Investor Relations team. Thank you.
Thank you very much. On behalf of Hindustan Zinc Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.