Q2 20/21

Oct 20, 2020

Quarterly report

Good afternoon, everyone, and thank you all for joining us today for Hindustan Zinc's 2nd Quarter and First Half FY 'twenty one Results Call. Today on the call, we have with us our newly appointed CEO, Mr. Arun Mishra and our CFO, Mr. Swayamp Saurabh. Mr. Mishra will begin with an update on business performance, while Swayamp will take you through financial performance, after which we will open the floor for questions. I now request Mr. Mishra to begin today's call. Over to you, Mr. Mishra. Thank you, Sita. Good afternoon and a very warm welcome to all of you. I trust that you and your families are safe and maintaining all precautions against the spread of COVID-nineteen. As your newly appointed CEO, I'm happy to share that we are continuing our operational excellence in a challenging environment. This showcases our resilience and innovative thinking as well as our unwavering commitment to become the largest and most admired zinc, lead and silver company globally. And while doing so, we remain equally cognizant of our environment, social governance commitments as well as sustainability goals. Caring for our communities is a value that all of us at Hindustan Inc. Hold very close to our heart. Our CSR team actively engages with the communities surrounding our operations and with other key stakeholders to closely understand their needs and align their initiatives accordingly. This is also reflected in our ongoing COVID mitigation efforts for which we are very humbled to have received CSR Health Impact Award by Integrated Health and Well-being Council, which was given as a token of appreciation for our exceptional response and on ground work with extensive focus on life, livelihood and help mitigate the impact of COVID pandemic. I am also delighted by the fact that safety and sustainability are deeply ingrained in our culture and all leadership at our operations ensure that business decisions are aligned with the same. This is also reflected in the recognition that we received for our efforts, which continue to encourage and inspire us to stay ahead of the curve. I am happy to share that Hindustan Zinc has won the CII Environmental Best Practice Award 2020 under the most innovative environmental project category. I am also proud to inform you that our 22 megawatt solar power project at Rampura Agucha, 12 megawatt at Dewari and 4 megawatt at Dariva are all registered under gold standard, which is the most rigorous certification given globally for carbon offset projects. It is evaluated based on net positive contribution towards economic development, employment opportunities, environmental and social welfare of the local population that hosts the project. Moreover, we have utilized waste land at all locations for solar panel installation, which is our complete portfolio of renewable power is registered under gold standard. As part of our ongoing drive towards waste to waste initiatives, Garibas Melting Complex has successfully commissioned a 4,500 tonnes per annum freeze precipitation technology plant. This will help to recover sodium sulfate from final multi stage RO projects, which will cater to 1 third of the river smelter hydro plant's input salt requirement. Coming to quarter's performance, I cannot be more proud to share that during the quarter we touched a few milestones. We saw an ever highest ore production supported by our proactive mine planning driven by increased use of technology and better targeting. Another good news is that we have produced highest ever quarterly silver and this gives us immense confidence to achieve the goals that we have set for ourselves and be top 3 primary silver producers globally in the coming years. We focus not only to increase production from our existing resources and enhance recovery via technology level disciplined operations, but also work towards accessing new mining zones and partnerships. And most importantly, we managed to bring our cost to the lowest level since we transitioned to underground mining operations in March 2018. All of this further bolsters our confidence in resilience of our people in newest technology in mines and our long life rig assets. We seamlessly adapted to fast changing conditions and deployed various initiatives and proactive measures in these challenging times to remain ahead of the curve. Coming to market update, global mine supply continue to face threats of COVID related suspension of operations and prolonged delays in new projects. Mines across the world are facing operational challenges to ramp up production while complying with social distancing norms. Moreover, no new major capacity enhancement is going through. According to Oud Nattanzi, compared to the start of the year 2020, mine production forecasts have fallen by over 1,300,000 tonnes reflecting a 10% drop on mined metal supply. This translates to a 5% global decline in mine production in calendar year 2020 compared to 2019. A sharp fall in TCs for imported concentrate demand in China from $3.10 in January to $115 in September further points towards an existing deficit in concentrate supply to China smelters. Global demand on the other hand is forecasted to contract by 5% to 6% in 2020, mostly during the first half. However, with a reset recovery emerging in China's industrial demand along with many governments including stimulus packages to kick start industrial activity, we are already witnessing demand bouncing back for base metals. We also anticipate that low interest rates and relative weakness in dollar would further support physical demand of metals going into quarter 3 quarter 4. Driven by this fundamental support, zinc prices staged a strong recovery during the quarter and not only returned to pre COVID levels, but also touched $2,500 per tonne mark last seen in October 2019. As mentioned earlier, this was primarily driven by Chinese demand where stocks in Shanghai Exchange, Molded Warehouses have fallen substantially from 160 kilotonne in March to 60 kilotonne at the end of quarter 2. We expect global warehouses stocks to remain at lower levels providing fundamental support to prices in coming quarters. In domestic market, as lockdown restrictions eased and India moved to unlock phase, the metal demand has started to recover. In the Q2, demand revised and reached almost the same level compared to last year's same quarter. Resumption of infrastructure projects as well as government stimulus are providing the required support to the recovery. Steel manufacturers, who are our key customers, are now running their plant at near normal utilization rates with resumption in demand reflecting in their increase of crude steel prices. While auto sales improved in other September, overall downstream demand has remained subdued. However, replacement battery segment witnessed an uptick in recent times, owing to seasonally related monsoons and also approximately 70 days long complete India lockdown led inactivity. Overall, we expect that linear demand recovery to continue across all segments and remain optimistic for the upcoming festive season. Global investors' interest bolstered the prices of silver, which was over 50% up in Q2 compared to Q1 average prices translating into significantly higher EBITDA contribution from silver. We expect prices to remain strong as physical demand on silver has started to recover globally as well as locally reflected in lowering arbitrage between LBMA and MCS. Moving on to operational update. During the quarter, our mined metal production was up 9% from a year ago to 238 kiloton on account of higher ore production. Subsequently, mined metal production grew by 18%, supported by higher ore production resulting from better mine planning and effective targeting with increased use of technology. However, this was partly offset by declining metal grades and later ore pigment. Integrated metal production was 2 37 kilotons, up 13% from a year ago and 18% sequentially in line with availability of mined metal with zinc at 180 kilotons and lead at 57 kilotons. Salable silver production was 2 0 3 metric tonnes, soaring 51% year on year and 73% sequentially due to increased operation of pyro led smelter, better grade that SK Mine and higher concentrate inventory. Coming to an update on our projects, I'm happy to share that environmental clearance is recommended by Expert Appraisal Committee for Gabor mine expansion from 4,000,000 to 4,800,000 tonne per annum. Also both the factory plants at Gabor are under commissioning and operation is expected to start in November 20. I am also happy to share an update on our new sales and marketing initiative. Hindustan Zinc has become the 1st ever producer in the non ferrous space to sell metal online with real time INR denominated prices. The platform called EVAL went PAN India live on September 18 and was very well received. Lastly, an update on Humar commissioning due to ongoing COVID-nineteen disruptions including GD restrictions for Chinese National, final commissioning of human plant at Sandrea could not be completed in Q2 and efforts are ongoing for an early resumption. As my closing remark, I would like to draw your attention to our previously guided FY 2021 volumes for both mined metal and refined metal in the range of 9 25 kilo tons to 9 50 kilo tons each and silver at around 6 50 metric ton. I am happy to inform you that we are on track to achieve the previously guided numbers. With this, I hand over to our CFO, Mr. Sourav Sorabh to update on the financial performance. Souravh? Thank you, Arun, and good afternoon, everyone. So before I deep dive into financial performance, I would like to draw your attention towards targeted efficiency initiatives that we as a management team have initiated since the Q3 of last year, which is transforming Hindustan Bank and setting stage for consistent volume growth and growing costs. Our unwavering focus towards strict capital allocation discipline and continuous improvement in cost driven by new age mining technology, rigorous benchmarking, continuous adoption of best practices across the globe is helping us to stay ahead and maintain our 1st quartile cost curve. Many of these cost optimization initiatives deployed across our operational units are already visible in our financial performance and yielding results. Now coming to financial performance for the quarter. Revenue from operations during the quarter witnessed NMPs of 25% year on year and was at INR 5,660 crores due to higher zinc volumes, which are up 8% year on year and increase in 30% in zinc volumes year on year. This was further supported by higher silver prices as well as a significant jump in volume as well as overall higher price realization as rupee appreciated over the year. However, some of these gains were offset by a fall in zinc led LME year over year. Compared to the previous quarter, revenue soared 42%, primarily driven by higher zinc lead LME prices. Sequentially, zinc LME rose 19% and lead LME increased 12%, which was further supported by higher metal premium resulting from revival in domestic demand after quarter 1. Some of the gains were offset as price realizations were impacted by rupee appreciation from quarter 1 to quarter 2. Zinc cost of production before royalty for the quarter was $9.19 per tonne, down 10% sequentially and 12% from a year ago. The reduction in cost of production is our continued effort towards structural cost optimization method As outlined by Arun earlier, we are actually proud to share that we have now reached the lowest level of cost for a quarter in dollar terms since we transitioned to a fully underground mine 2.5 years ago. This is a result of extraordinary effort on all fronts including consumption, contracting, procurement and fixed cost optimization, resulting in sustained improvement at cost levels. This was also made possible by a number of costs, including different look at fixed costs, digitally backed operational efficiency tracking, redesigning some of our contracts and renegotiation as well as efficiency related to consumption norms and favorable commodity sourcing. The resulting EBITDA for the quarter was INR2952 crores, a higher 39% from a year ago and 85% sequentially on account of higher revenue and lower operating costs. Net profit for the quarter was INR1940 crores, a drop of 7% from a year ago, but a stellar increase of 43% sequentially. This was primarily due to higher depreciation and amortization as well as finance costs and higher tax due to change in our income mix. Our treasury income typically is taxed around 11%, while our business income is taxed above 27%, 28%. So when the interest rate started to come down, our business income increased in proportion and this change in mix led to volatility in the tax rate between quarter 1 and quarter 2. However, for the full year, this can be guided at an average of 24% to 25% of effective tax rate. I'm also happy to inform that Board has approved an interim dividend of INR 21.3 per equity share, which is approximately 9 30% basis base value of INR 2 per share and amounts to a total dividend payout of INR 9,000 crores. The record date for the same is 28 October 2020. Now coming to our previously guided cost in CapEx for the fiscal year. Our cost base is successfully resetting to a lower level, and we are confident to keep zinc cost of production comfortably below $1,000 for this fiscal year, which is inclusive of significantly higher mine development expenditure to support future volume growth. As for CapEx, we keep our guidance intact with a focused approach of investing in high IRR projects and exercise continuous prudence in an uncertain business environment to strike a delicate balance between investing in growth and conservation of cash. With this, I open the floor for questions. Thank you very much. We will now begin the question and answer The first question is from the line of Amit Dixit from Edelweiss. Please go ahead. Thanks for taking my question and congratulations for a good set of numbers. I have a couple of questions. The first one is on your silver production guidance. At around 650 tonnes, I believe it looks a little bit conservative considering what you have done in this quarter and the last, of course, being an exception. But if the current run rate holds good, I think your silver position should be higher than what you are guiding. Any comments on the sales? So silver production will still stick to the guidance because this quarter, if you observe, the silver grade in the mine metal from SK Mine has been better than last quarter. However, looking at mine and overall plan basis, we would stick to a balance number, which would reflect in the guided production. Correct. Just to add to that, there is also a recognition that the COVID has not gone away. And while these numbers are indeed cautious and your assessment is correct, we have done C48 at H1 basis. If production stays as to plan, we should be able to beat our guidance, but for now this guidance works. Okay. The second question is on cost of production. So as we observe, it is significantly down almost $100 per ton Q o Q. And you have also highlighted during the opening remarks about some of it remaining sustainable and the fact that we have achieved a particular cost level. I think some of it would be driven by the transportation cost and as you rightly mentioned, on the various factors. So just for you to understand how we are guiding our cost of production also to 1,000, we are doing 219. I believe it should remain at the similar level and we should end up much below the guidance. So 2 parts of my question. 1 is, of course, what are the assets that you consider sustainable? Of course, coal cost can vary, but there would be some sustainable factors. How much would be that? And the second is like my previous question, this cost of production also appears to be similar to the survey? All right. So you are right. I mean, at H1 level, our cost of production is $9.65 We have shown significant improvement in quarter 2. And almost a very large part of this is going to be sustained because they are structural, they are driven by actions which has been initiated for some time, changing our basic cost fabric. The reason we are guiding higher cost, slightly higher cost than going into H2 is the point I made I think 3 quarters back is we need to invest ahead of curve in developing faster. What that would end up help us do is really give us a larger immediate mineable reserve. But when I mine them, then only the benefits would come. So we are trying to build a little bit flexibility in our system. Just to use a reference, a typical global company would have almost 2 months' worth of production sitting in Mineggru reserve. We are not there yet, and we want to get there because this also allows us to be more predictable, more consistent with our volumes. Okay, great. Thanks and all the best. Thank you. The next question is from the line of Vinakan Parekh from JPMorgan. Please go ahead. Yes. Thank you very much. Two questions from my side. The first is on the dividend and balance sheet. Now in terms of we still see there's a INR 4,500 crores of borrowings on the balance sheet. Going forward, how does the company look at debt? And can you guide us to in terms of what is the thought process on how much would the company like to lever up the balance sheet on a gross basis? What metrics would it use? Would it be a debt to EBITDA, a debt to equity? And the second is on the expansion projects. I mean, there is not much of a commentary. The project the volume guidance implies a mined and refined metal production of 510 kt in the second half of the year. So at this point of time, given all the COVID related shutdowns that have taken place, the roadmap to 1,200,000 tonnes, where do we stand? Where can we see a run rate production come through? Yes. So let me take the first question and Arun will answer the second one. We are open to leverage balance sheet, more to do with the fact that the investments might have different time horizons and tax efficiency. So it's a choice between if a dividend has to be paid like the one which was announced today, breaking those investments and you lose the coupon and versus a scenario where you could borrow cheaper. So leveraging also a cheaper interest rate environment, but we are very conscious of net debt to EBITDA as well as debt equity ratio. And while I cannot be more specific here at this moment, we would like to assure you that this will remain very, very healthy like our balance sheet has always been accepted. Yes. And on the question of 1,200,000 ton metal production rates, we are confident that in quarter 4 we'll be hitting that number. And if you look at our guidance, we should be producing about 950 kilotons of metal. And if we continue at the current rate in the quarter 3, quarter 4, we should be even better than that. And quarter 4 expected exit at 1,200,000. Understood. Thank you very much, sir. Thank you. The next question is from the line of Anuj Singla from Bank of America. Please go ahead. Thank you very much, sir. So one question on the investment side. You recently signed up IMOU with a discharge comment regarding 300 KT splinter, Greenfield 1. So can you just give some more color on the requirement of a Greenfield splinter? My understanding was we do have enough leeway at the existing locations to increase spencer capacity. Why Gujarat and what kind of incentives will be available there in terms of taxes and other incentives and what is the IR target, which we hope to get there? Yes. So the MoU is still at initial we are at initial stage at these stage. But I will give you a very high level insight on why this still makes sense. So a coastal smelter have, let's say, a more efficient access to external concentrate if because we see an opportunity here. Also when our volumes grow to the level it needs to grow, as you know, as part of my current mix of percentage, today approximately 20%, 20%, 22% is exported. So it makes sense and it fits in our longer term plan. Now why Gujarat? 1 is indeed today part of my product gets exported. So it does not add pressure to my supply chain. But also as an investment destination, Gujarat is very attractive for us access support. And the last point around IRR, again, I'm not going to be specific, but we have very high hurdle rates defined for ourselves for any investment to make sense. And we are very confident that once the initial feasibility gets completed, this project would provide that kind of IRR. So any broad number, sir? Is it 20% plus, 25% plus? And any kind of just broad or broad number on what kind of IRR we can look at? Yes. After we complete the retail feasibility and we arrive at that budget cost, I think that time quoting a figure of 2 payers, correct. Okay, Understood. And sir, the second question is regarding our second phase of growth, volume growth from 1.2 to 1.5. So what is now the timeline for that? Has it also got impacted because of COVID? And will this also entail more smelter investments within the maybe existing locations or elsewhere? So it's a 1,200,000 tonne to 1,500,000 tonne, obvious that there will be additional smelting requirement. It is also associated with about 1400 tonnes of silver. So that's obvious more of silver refining capacity. So these 2 are which are under study currently, how do we debottleneck and where do we take our smelting capacity to. And beyond that only if any additional facility to be provided. So that is under study. 2nd part is from the mine side, how do we make this not for 1 year production, it has to be sustainable. So the life of mine studies are in phase out of all the mines, 2 mines we have first completed life of mine study, balance mines are in place. And by December, we will be completing the life of mine study, the feasibility report for this expansion. And then we can come back with a fairer number on what it would actually entail and the time line that it would take us to complete this project. Understood, sir. Thank you very much. All the best. Thank you. The next question is from the line of Indrajit Agarwal from CLSA. Please go ahead. Yes. Hi, good afternoon. Thank you for the opportunity. A couple of questions. One on the employee cost, it has dropped sharply both Y o I and QOP. So how what drove this reduction and how should we look at it going forward? So you are right. Employee cost has dropped to INR 166 crore in quarter 2, which translates into about INR 650 crores, INR 6.60 crores of annualized run rate. If you look at the way cost reductions have been achieved, Optimizing employee cost has been part of the structure. And the simple explanation on why Q1 cost was higher is quite simply Q1 as well as Y o Y. Q1, we had to pay some VRS, which is not there in Q1 as part of our, let's say, employee cost optimization part of for delaying the optimization. The right answer here is actually a guidance. We expect the cost around employee to remain under 700 crore annually. And just to remind you, 2 years back, the employee cost of INR 9,000,000 crores. Yes, that's very clear. Second question on the COP side, right? I see that you have restated your Q1 COP. Is it because the mine development expenses have been added now in the Q1 numbers as well? It was 10,954 when you reported 1st quarter numbers, now it is 1019. So is that all the adjustment or if there is any other adjustment there? No, there is no adjustment. The difference between 954 and 1019, it was made very clear that it represents INR 105 crores donation, which was made in Q1 to support COVID, which was in Prime Minister's case on the data between these 2 is the 5 year data. Sure. That helps. Last question again on the balance sheet side. So if I add investment, you're seeing INR 8,000 crores of cash and investment, about INR 4,300 crores of debt. Even if you assume INR 9,000 crores of this dividend payment, you'll still be left with a healthy cash balance and there's enough cash generation at Hindustan, Inc. Level. So what is the thought process on capital allocation? Is it like continuously higher extraordinary dividends or we can like the Gujarat smelter, we can see some more organic inorganic aggressive expansion? So it's a combination of both. And to be very honest, this is a matter which is a prerogative report. But we do want to allocate capital to places where we can create at certain spaces and better return for stakeholders. And if there is excess cash at certain moment, it gets distributed back to shareholders. This is all I can provide. I think, Suan, if I can add, the feasibility for expansion needs are for the 1,500,000 tonnes tonnes tonnes, and as I said, for silver to go up to 14,000,000 tonnes. This will also be associated with a lot of waste to waste projects, which will be on the mine and mineral side. So if we look at capital allocation, those will be the preferential areas of allocation going forward. Correct. Sure. Thanks a lot. Thank you. That's all combined. Yes. The next question is from the line of Pallav Agarwal from Antique Proking. Please go ahead. Yes. Good evening, sir. So I had a question on you've not mentioned anything on the fertilizer project. So given that we are now looking at a Greenfield smelter in Gujjar, so are the plans for the fertilizer project still on or we've shelved that for the time being? No, no, firstly the project is on and we are aggressively pursuing the project. We are also now looking at in the Fatma River India campaign to how to use more domestic rock prospect and appropriate the design accordingly, that is number 1. 2nd is the location is finalized. It's just that some of the clearances are being walked through and very soon we'll be once we go to the Board and take approval, we'll be declaring it. Sure. Okay. As I look at the premium in physical premiums, for zinc, it still seems to be lower than last year's levels. So is it because our export proportion still remains high or will it see improvement in these premiums next quarter onwards? There are three reasons. One is indeed the ratio of domestic and export. To use a data point here, quarter 2, the domestic sales as a percentage of total sales have started to normalize. It is not yet at last year level, but it has changed sharply in a positive way. 2nd is LME itself. The total premium includes an import duty equalization component. So while zinc LME has improved very significantly, it is still a little bit lower than where LME was last year. So that has another small impact. And the third one is exchange premium. We clearly see a trend of premiums improving. So there are 3 global HN exchanges we track and that becomes a reference for us. But they are still not have reached at the levels they were last year. Is this because of the lower demand on the ground? Is that causing a slight subdued physical steam? I think the perception of demand is a factor because we see that premiums are catching up to the price. That's a trend we see in last 5, 6 months. And as zinc prices are strengthening and holding actually quite well, we also see that the premium depreciation premiums have improved quite significantly, actually almost as high as 30% improvement in quarter over quarter. So we expect that trend to continue, but of course, COVID is still a factor for everyone out there. But we very clearly see signs of recovery. The fact that drink has almost touched last year level itself says a lot and this is holding on. Sure. Just finally on sulphuric acid and BiTE products, so have you started seeing some improvement over there as well? Seep improvement. So as we mentioned in the last quarter, our sulphuric acid realization dropped last quarter to INR 13.50 per ton. They have now improved to over INR 21, INR 22 over INR 2,100. So that's the trajectory which we forecasted last quarter, and I think we are very much there. It further improve. Sure. Okay. If I can just squeeze in one last question. So just on the commercial paper would be I think it's short term. So I guess we would be repeating that. So could you give us a sense of how the rates are like, is there an arbitrage between what we get on our deposits and what we are paying on a short term commercial paper? Yes. It's a good question. I think it links back to a question which was previously asked around our leveraging balance sheet. So today, short term borrowing is indeed very attractive. When I compare to some of the investments which are locked for tax efficiency. So a short term borrowing versus an option of breaking something which is locked for, let's say, up to 3 years horizon. But a short term borrowing compared with a short term return, if I have to keep that liquid, is definitely not attractive. So simple answer is very attractive short term 60 days, also leveraging our balance sheet to get those kind of rates, which also could be the reason that we may be actually open to fund some of our short term funds requirement using these products instead of breaking an investment with an attractive coupon. Okay. All right, sir. Thank you so much for answering. Paul. Thank you. We request you to rejoin the queue. We take the next question from the line of Ritesh Shah from Investec Capital. Please go ahead. Hi, sir. Thanks for the opportunity. So my first question was on the Gustaf smelter. Just wanted to understand, will it only process concentrate from Rajasthan mines or is there scope that it could also do blending from Zinc International? So this is the new area to explore on the concentrated flow that happens around the coast of India to various destinations. As Sourav explained, strategically it also fits with when we expand to 1,500,000 tonnes. If there is an additional smelting capacity needed and if we decide to do so, this could still serve as an export oriented smelter located on the coast. But as of now, the business case standalone which is justified separately at the preliminary stake on the concentrated flow that happens around the coast of India for the various dissonance in the Southeast Asia and beyond. Okay. That's helpful. And so my second question is, is there any update that you can provide on I think government did indicate that the arbitration process will start. Has there been any update for that consultation with the government? If you can update something over there, it will be for We would not comment on that question because this does not relate to us. Okay. Then probably I can ask one more question. Sir, how do you see on the timelines on unwinding of ledgers at Hindustan's link level? How do you see this? Like, what is comfort level that we have over here? How should we look at it, sir? So you are referring to pledges by Vedanta? Yes, sir. This is again the most right for our question. Question. Okay. Fine. Thank you so much. Thank you. The next question is from the line of Rahul Jain from Systematics. Please go ahead. Yes. Hi, sir. Thanks for taking my question. So, sir, how should we look at our volumes going for FY 2022 and 2023? Because I think we have the expansion from 1.2 to 1.5 will likely take 2 years. So should we assume like a flattish volume curve from year on? It is still quite far in the distance. We have a tentative target of taking up 1,500,000 ton project and completing it with the life of mine study that the investment can be sustained at a good economic IRR over a period of 10 years. So that should fall somewhere around FY 2023 or FY 2024. But the exact time lines and what numbers will come, I would refrain myself from guessing just now. And what kind of broad number are we looking at for this kind of See, if I have to explain the way the mining is done, that 1,500,000 tonne is not a steel plant that will be cleared on and it will start producing the next day. The mine development has to start. So many of the preliminary activities are already on. The mine has to be developed, incline has to be done and then your football drive has to be done, somewhere that's after work has to be done. So all those are some being studied, some main projects. So you will see a gradual step up in the numbers from now till FY 2024. And if the other parts of the project, which is in the smelting, which could be in the mine ventilation, which could be in the infrastructure of power, if those are also in place, then you would see the final numbers taking in towards that timeline. So is it like 5% to 10% kind of an increment or bigger than that? It will go in steps and I won't put a quantity to it, but it will continue to grow up between year on year. And sir, given that we have a limited mine life now, so what is the rationale of reinvesting so much in smelting projects because anyway the TCRCs are very low to justify any kind of real need to get into that business? No. So as I said, we are doing pre feasibility. If you look at last 5 years' CCRTs, possibly there is still a business case there. The question is, in an integrated view for SLS 5, 7, 8 years from now, what kind of returns would it generate? And once the feasibility is complete, we'll be able to perform more clarity. Of clarity. The next question is from the line of Vishal Chandra from MK Global Financial Services. Please go ahead. Yes. Thank you very much for taking my questions. My question was just a follow-up on the Gujarat smelter. Somewhere in the back of mind, do we also are looking at transporting the Hamburg ore at some point in time as we see the TCs might be low for a while, maybe 3 years, 4 years down the line as a way of integrating these two facilities given the fact that there are tower outages over in South Africa and in Gujarat being one of the best destinations for investment as you mentioned. So do we look at the integration of the Hamburg ore with the smelter to be set up in Gujarat? So this smelter, as I said, standalone basis, it is built on the concentrate cash flow that moves around that coast of India. That flows in that moved around that coast of India. This does not exclude Gamsberg or any particular facility, so to say. As long as the business is justified, all concentrates will be used as long as technology justifies the separation of minerals based on those. Because every concentrate has its own peculiarity, some has more manganese, some has less manganese, some more cadmium. So, it's a call will be taken once we do the digital feasibility report. Yes. So, second question was again with the capital allocation that you mentioned. When you look at funding the short term debt through the long term investments, which is understandable, you have certain investments logged in for 3 years, etcetera. But the rationale for LCD at this stage, do we really have an immediate deployment of that tune or basically trying to fund the dividends at this point in time? Because even if we assume on a net basis, even after we take out the INR 9,000 crores of dividends, the net cash under the books is still at about INR 8,800 crores, assuming everything all the debt is immediately paid out? Right. So the net cash which you have calculated not necessarily would be cash because they would be part of a pool under cash and investment. And the current NCD fits in because the timing of NCD is not necessarily the dividend or liquidity needed for dividend, but also some of the other commitments, a few questions are asked around them, we may have to commit to in the next 6 to 12 months. So this basically is part of the planning, which has been done on what kind of cash we might be needing for next 12 months And hence, since it is time, the rate is time. Sure. Thank you very much, sir. Thank you. The next question is from the line of Vinit Malu from Birla Sun Life. Please go ahead. Hi, good afternoon. Thank you for this. So I just want to know, it's good to know about this that you want to actually pay out more dividends and you're not actually worried about levering up a little bit to take care of the sort of investment and time line mismatch. You did speak about there will be guardrails in terms of how much leverage you'll earn on debt equity or debt EBITDA side. Could you share some of those metrics that you're looking at with the outside limits that you would want to maintain at all points in time regardless of the cycle? So I'm not able to quote a ratio as we will we are planning to basically have a sign off with Board in coming future. But what I can assure you that it will remain very, very healthy irrespective of what industry you compare that with. This is all I can give you right now. Okay. I would assume that you would have something in mind already because I'm sure this is probably the first time that you're actually deburring this kind of amount. And so a lot of thought would have gone into this process already. But anyway, we can wait for that development. The other question I had was on the smelter in Gujarat. You mentioned that it could also process independent raw material. I'm just wondering, do you is it that you foresee somewhere in the future that dynamics for smelters would are likely to be better than just your mining or rather not integrated smelter and mining that you would look at processing from the independent raw material as well? Good question. So custom smelters are standalone business. It's a very healthy business model. While the current decline in TCRC, if you just look at last few years, there is decent IRRs when done well. Technologies are also changing leading to very high level of recovery with that. But if I add another context here, I mean, if you just look around and the data on what kind of concentrate which gets flown into Asia for processing, at Asian metal demand 5 years from now, you would understand the rationale behind why we are looking to why exploring to build a customer. That's one side of it. Other side could also be within Vedanta if there are better integration. And third is indeed our own growth model. I mean, we are looking to get to 1.35 then to 1.5. So sooner or later smelter is coming. And we are just seeing it in a more broader perspective that is there are there other adjacent opportunities? While we continue to focus on mining growth, are there other adjacent opportunities which can also create value for shareholders? And this includes the smelter as well as fertilizer. Yes. So I appreciate the point that eventually as mining volumes grow, you would need smelting capacity. But I was sort of thinking that a brownfield expansion and integrated operations would be better to cater to that part of the whole picture, right, when mining volumes grow? Because since you specifically mentioned the ability to process independent raw materials, I was just curious whether you believe that smelter economics itself is going to be attractive versus mining? No. So this question you are asking, I think, 3, 5 months ahead of its time. So we are doing feasibility, pre feasibility right now. And all these variables are getting assessed. And when time is right, we would also announce that. Okay. Yes, fair enough. Yes, I'm done with my questions. Thank you. Thank you. We'll be able to take one last question. The last question is from the line of the last question is from the line of Abhiyan Iyer from Deutsche Bank. Please go ahead. Yes. First of all, congratulations for your results, sir. Could you just give me a quick rundown of what type of investments in the current investments? Basically, I just wanted to get a sense of what kind of instruments these are and how, if required, these can be sort of liquidated? So your question was specific to current investments or total investment? The current investments or actually both specific. Yes, current investments would be CPs would be sorry, would be FPs, would be liquid money market, which are very short term. But other than that, our total investment composition would have FMPs, 0 coupon bond. I mean, total investment portfolio is rated very, very high, but we maintain that mix of long term versus short term. Got it. Got it. Thanks. Thank you very much. We'll take that as the last question. I would now like to hand the conference back to Ms. Shweta Arora for closing comments. Thank you. Before we close today's call, I'm happy to share that we are progressing well on our journey of comprehensive and holistic disclosures. And towards this end, I want to update you all that we have published our 1st ever integrated annual report for the financial year 'nineteen-'twenty, and we look forward to your valuable feedback on the sale. Also, our tax transparency report as well as our sustainability report are now available on our website. With this, I close today's call. For any follow-up questions or clarifications, please feel free to reach out to Investor Relations team. Thank you.