Due Diligence of Hindustan Zinc

PSU Disinvestment through

Stratergic sale
Overview of the presentation
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 countrys zinc
production

Headquartered in Udaipur

Owns 6 mines (operates 4) and 4 smelters
Capacities & Production
11 mths 12 mths (est)
Zn Ingots 161,300 MT 180,000 MT
PRODUCT CAPACITY PRODN. 2000-01 PRODN. 2001-02
(9 mths)
Zn Ingots 169,000 MT 148,092 MT 132,542 MT
Lead Ingots 43,000 MT 34,840 MT 28,993 MT
Silver 86,000 kg 35,127 kg 36,946 kg
Sulphuric Acid 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
Financial Highlights
(Rs. mn.) as on 31.03.2001 31.12.2001
Share Capital 4,225.3 4,225.3
Net Worth 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
Mines & Smelters



Mines - Details
MINE RAMPURA
AGUCHA
RAJPURA
DARIBA
ZAWAR AGNIGUNDALA
Ore with Grade Lead-Zinc
Zn 13.70%
Pb 1.90%
Lead-Zinc
Zn 8.00%
Pb 2.10%
Lead-Zinc
Zn 4.63%
Pb 2.40%
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
Nearest City Bhilwara 80 km Udaipur 80 km Udaipur 44 km Guntur 25 km
Cost of
Production
(2001-02)
Rs. 5,691 / MT

Rs. 17,326 / MT Rs. 16,863 / MT 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 CHANDERIYA DEBARI VIZAG TUNDOO
Metal Zinc & Lead Zinc Zinc Lead
Capacity Zinc 70,000 tpa
Lead 35,000 tpa
59,000 tpa 40,000 tpa 8,000 tpa
Process Zinc ISP
Lead Pyro
Electrowinning Electrowinning Pot Sintering
Recovery
(2000-01)
Zinc 90.67%
Lead 89.86%
95% 87% 87.15%
Nearest City Bhilwara 45 km Udaipur 15 km Vizag Dhanbad 36 km
Cost of
Production
(2001-02)
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 DEBARI VIZAG
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)
- 195 / 254 / 213 182 / 141 / 100
Employees



Employees
WORKMEN EXECUTIVES TOTAL CONTRACT
as on 30.6.01
As on 30.9.2000 9,482 1,339 10,821 3,254
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 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
4. Tundoo 33 514 547 45
Mines:
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
Others 174 389 563 150
TOTAL STAFF 1,078 7,277 8,355 3,254
Other Assets



Other Assets
City Location Nos. Nature Area (sq.ft)
Jaipur Bani Park (Flat) 2 Owned 1050 x 2
Bani Park (Flat) 1 Owned 1,650
Bangalore 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
Delhi 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
Other Assets
City Location Nos. Nature Area (sq.ft)
Mumbai 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
Kolkata A. J. C. Bose Rd., Tollygunge 2 Owned 1159 x 2
Car park 1 Owned
CIC Bldg, (Flats) 2 Owned 2324 x 2
(Car Park) 1 Owned 200
Udaipur H O Yashad Bhawan Owned approx. 30,000
Past Financials



Summary P&L Accounts Past
Rs. mn.
1998-99 1999-2000 2000-01
2001-02
(9 mths)
Net Sales 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
Loans 940 150 57 642
Net Fixed Assets 6,557 6,482 6,642 6,485
Investments 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
Cashflow Statement - Past
(Rs. mn.) 1999-2000 2000-2001 2001-02 Q1-3
Opening Cash Balance
1257 1658 695
Sources
Net Cash Accruals
1574 2319 265
Increase in Loan Funds
- - 600
Sale of Fixed Assets
- - 158
Total
1574 2319 1023
Uses
Decrease in Loan Funds
789 94 15
Inc./(Dec.) in Net Working Capital
-469 1038 1433
Purchase of Fixed Assets
595 738 -
Purchase of Investments
- 830 0
Dividend paid
258 582 -
Total
1173 3282 1448
Surplus/(Deficit)
401 (963) (435)
Closing Cash Balance
1658 695 260
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. Rs./MT %
Realisation (incl. Other income) 14,634 79,998 100.00%
Variable Costs Raw Materials 2,278 12,451 15.56%
Power & fuel 2,628 14,368 17.96%
Other factory expenses 109 597 0.75%
Total 5,015 27,416 34.27%
Contribution 9,619 52,582 65.73%
Fixed Costs Salaries & Wages 2,790 15,254 19.07%
Other fixed expenses 3,394 18,555 23.19%
Total 6,185 33,809 42.26%
Total Expenditure 11,200 61,225 76.53%
PBDIT 3,434 18,773 23.47%
Depreciation 577 3,156 3.95%
Interest 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%
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 SMELTERS
Zawar 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 Zn Metal
43,457 36,091 306,052 57,000 37,000 86,000
Cash profit (Rs. mn.)
-127.78 -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 SMELTERS
Zawar RD RA Debari Vizag Chanderiya
Production with capex
(T)
Zn Concentrate Zn Metal
54,322 57,745 306,052 57,000 37,000 86,000
Cash profit (Rs. mn.)
-103.26 -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 -143.20 1,178.14 210.01 189.52 1,248.50
VRS Cost (Rs. mn.)
1,591.5 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 CAPACITY (MT) %
Pasminco 656,000 12.59%
Korea Zinc 628,000 12.06%
Union Miniere 476,000 9.14%
Cominco 391,000 7.51%
Asturiana (now with Xstrata) 335,000 6.43%
Glencore 307,000 5.89%
Falconbridge 245,000 4.70%
Noranda 244,000 4.68%
Mitsui 239,000 4.59%
Outokumpu 225,000 4.32%
Metaleurope 224,000 4.30%
Industrias Penoles 220,000 4.22%
MIM 174,000 3.34%
Hindustan Zinc 169,000 3.24%
Zinc Corp America 148,000 2.84%
Norzink 143,000 2.75%
Grupo Mexico 105,000 2.02%
MG 100,000 1.92%
Padaeng 95,000 1.82%
Anglo American 85,000 1.63%
5,209,000 100.00%
Consumption Pattern
49%
20%
14%
9%
8%
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
LME Price Progression - Zn
(US$/ ton)
0
200
400
600
800
1000
1200
1400
1600
1800
A
p
r
-
9
5
A
u
g
-
9
5
D
e
c
-
9
5
A
p
r
-
9
6
A
u
g
-
9
6
D
e
c
-
9
6
A
p
r
-
9
7
A
u
g
-
9
7
D
e
c
-
9
7
A
p
r
-
9
8
A
u
g
-
9
8
D
e
c
-
9
8
A
p
r
-
9
9
A
u
g
-
9
9
D
e
c
-
9
9
A
p
r
-
0
0
A
u
g
-
0
0
D
e
c
-
0
0
A
p
r
-
0
1
A
u
g
-
0
1
D
e
c
-
0
1
(US$/ ton)
LME Prices (Current Levels)
Cash = $ 813 / MT
18 mth Forward = $ 883 / MT
27 mth Forward = $ 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
2
9
.
2
7
3
2
8
.
3
2
1
3
1
.
1
7
5
2
9
.
1
6
2
2
9
.
9
2
3
111.149
136.271
141.806
145.796
148.092
0
25
50
75
100
125
150
1
9
9
6
-
9
7
1
9
9
7
-
9
8
1
9
9
8
-
9
9
1
9
9
9
-
0
0
2
0
0
0
-
0
1
'
0
0
0

t
o
n
n
e
s
BZL HZL
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
Supply/Demand Balance (tonnes) 375,000 217,000 107,000 16,000
LME Cash ($/tonne) 900 1050 1100 1150
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 non-
VRS 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
Companys 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
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Rate (%) 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 8
th
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 = 8.00%
Market rate of return = 14.39%
Stock Beta = 1.2 (or 120%)
Growth rate to perpetuity = 2.00%
Cost of Equity = 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%
Buyers Call Option: 6 months from Closing Date for
a period of 1 year - Upto 18.92%
GoIs Put Option: 30 months from Closing Date for a
period of 1 year Upto GoI stake of 26%
Buyers 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. Buyers Call Option - 6 months after closing date upto
18 months (Upto 18.92%). {at higher of Bid Price or
Market Value}
5. GoIs 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. GoIs 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
LME Price of Zn SHG
($/t)
H1 880
H2 765
800 850 900
Tonnage of Pb-Zn 218,000 218,000 218,000 219,000
Net Sales 12,619 11,961 13,511 15,170
Other Income 292 150 150 150
Total Income 12,911 12,111 13,661 15,320
Total Expenditure 11,082 11,439 11,996 12,802
EBITDA 1,829 672 1,665 2,518
Depreciation 687 717 758 771
Interest 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
Profitability Projections
Rs. mn. 2001-02 2002-03 2003-04 2004-05
PBDIT / Sales 14.16% 5.55% 12.19% 16.44%
PAT / Sales 3.94% -3.71% 3.39% 5.39%
EPS (Rs.) 1.20 -1.06 1.10 1.95
Net Cash Accruals (Rs. mn.) 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%
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
Loans 0 0 0 0
Gross Fixed Assets 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
D:E Ratio 0 0 0 0
Current Ratio 2.45 2.52 2.36 2.65
Cashflow Projections
Particulars (Rs. mn.) 2001-02 2002-03 2004-05 2005-06
Opening Balance 695 5 633 1,557
Sources of Funds
Funds from operations 1,829 672 1,665 2,518
Inc. in term loans 0 0 0 0
Dec. in NWC 409 658 0 0
Total 2,238 1,330 1,665 2,518
Use of Funds
Inc. in Fixed Assets 440 660 660 200
Inc. in NWC 0 0 144 179
Dec. in term loans 57 0 0 0
VRS Payments 1,445 578 0 0
Other Payments 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
Cost Structures



RD Mines Cost Structure
38%
17%
8%
6%
5%
5%
9%
12%
Salaries & Wages
Power
Royalty
Stores
R&M
Depreciation
Others
Admn. Expenses
Zawar Mines Cost Structure
46%
18%
8%
8%
3%
6%
6%
5%
Salaries & Wages
Power
Royalty
Stores
R&M
Depreciation
Others
Admn. Expenses
RA Mines Cost Structure
8%
18%
29%
7%
7%
0%
4%
27%
Salaries & Wages
Power
Royalty
Stores
R&M
Depreciation
Others
Admn. Expenses
Debari Smelter Cost Structure
35%
45%
3%
4%
0%
4%
9%
Power & Fuel
Feed Material
Stores & Chemicals
Salaries & Wages
R&M
Depreciation
Others
Vizag Smelter Cost Structure
28%
40%
4%
5%
1%
7%
15%
Power & Fuel
Feed Material
Stores & Chemicals
Salaries & Wages
R&M
Depreciation
Others
Chanderiya Smelter Zn Cost Structure
23%
43%
13%
5%
6%
5%
5%
Power & Fuel
Feed Material
Stores & Chemicals
Salaries & Wages
R&M
Depreciation
Others
Chanderiya Smelter Pb Cost Structure
21%
51%
9%
5%
6%
4%
4%
Power & Fuel
Feed Material
Stores & Chemicals
Salaries & Wages
R&M
Depreciation
Others
Tundoo Smelter Cost Structure
5%
42%
10%
2%
1%
7%
33%
Power & Fuel
Feed Material
Stores & Chemicals
Salaries & Wages
R&M
Depreciation
Others
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
Grupo Mexico 10.70 0.50
Average 5.38 0.66
HZL Value (Rs. / Share) 16.53 18.61
Share Values
Book Value (31.3.2001) Rs. 25.46
Book Value (30.9.2001) Rs. 27.06
Market Price as per SEBI Guidelines Rs. 18.39
(Rs. / Share)

Full Equity
(@ 15.47%)
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
Sterlites 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