HINDUSTAN HINDUSTAN ZINC LIMITED External and Internal Analysis
Strategic Management Assignment 2 27 Oct 2!"#
Hind$stan Zinc Limited
Company Background Hindustan Zinc Limited (HZL) is a subsidiary of Vedanta Resources, which is an integrated mining and resources producer of lead, silver, cadmium and zinc (integrated producer) !he company is head"uartered in #daipur, $ndia %urrently &r 'gnivesh 'garwal is the %hairman of HZL HZL is one of the worlds leading player in the on *errous &etals sector, with an annual turnover of Rs +,-.. crores (as on */ +0) HZL was established in the year +122 as a 3ublic 4ector #nderta5ing 's a part of the $ndian governments disinvestment program for loss ma5ing 34#s, HZL was put up for sale in the year 677+ $n 'pril 6776, 4terlite 8pportunities and Ventures Limited (48VL) made an open offer for ac"uisition of shares of the company 9ith the above additional ac"uisition, 48VL:s sta5e in the company has gone up to 216; !he asthan 8ther mines with HZL are located in 4indesar ?hurd, Ra>pura @ariba, ?ayar and Zawar, all in Ra>asthan HZL is one of the lowest cost zinc producers in the 9orld 8ther sectors that consume lead are Hospitality, educational institutes etc, !he company:s core business comprises of mining and smelting of zinc and lead along with captive power generation !he company:s current metal production capacity is +,72,777 tonnes per annum (.-1,777 tonnes of zinc and +.0,777 tonnes of lead) 9ith reserves and resources of A+A6 million tonnes, their eBploration programme is integral to their growth and future eBpansions !he company also owns - &9 of coal based thermal captive power plants in Ra>asthan to support their metallurgical operations !hey also have +6A6 &9 of wind energy in arat and ?arnata5a, which is sold to the respective 4tate grids
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Hind$stan Zinc Limited
Financial Ratios ?ey Ratios @ebt=C"uity Ratio %urrent Ratio $nventory !urnover Ratio R8%C (;) 3rice Carning (3DC) 3E$@!&
*/ +0 7 ++. +AA2 6A.-A 2A01
2
*/ +2 7 7A +A22 6+A+ +AA 276A
Hind$stan Zinc Limited
External Analysis Porter’s Five Force Model Five Forces
!he bargaining power of suppliers is much lower for an integrated smelter li5e HZL as they have their own Eargaining power of suppliers
mines for eBtracting the minerals !he bargaining power is limited in case of power purchase as it is highly regulated by $ndian government (sole supplier of power) Euyers en>oy higher bargaining power as prices of the
Eargaining power of buyers
commodities produced are based on demand and supply Lead and Zinc are used in the manufacturing of steel, copper, platinum etc, 4ince lead and zinc might prove to be costly 'luminum is used in steel Li5ewise, 'luminum, fiber optics or grapheme and steel for
!hreat of substitutes
copper, 3alladium for platinum 'nd also Lithium batteries will soon replace Lead 'cid batteries 'nd also several renewable energy resources such as solar energy is powering automobiles which might prove to be a substitute to Lead batteries in the near future %ommodity prices are set internationally and individual players have no control over it HZL faces
$ndustry rivals
several other ma>or players such as Hind %opper, !inplate, 3recision 9ires, 4agardeep 'lloy, %ubeB !ubings to name a few /et Hindustan Zinc is a leader in this sector CBploration and development of mines re"uires large
3otential entrants
capital investment Hence the sector does not face much of a threat from new entrants
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Hind$stan Zinc Limited
Internal Analysis Competitive Advantage !he 5ey competitive advantage in the lead smelting business comes from the company:s captive power additions, reducing critical power costs !his will be a handy edge over secondary recyclers which operate on single=digit margins, resulting from the high cost structure of importing lead scrap and smelting it 'nother ma>or competitive advantage of HZL is that it is a near F zero debt company High scale, low cost and high mar5et shares, and a resilient focus on enhancing efficiency and maintaining cost discipline are the main ob>ectives of the company HZL is an integrated miner, with its own smelters to process the ore from the mines into refined metal, which saves the company from mar5et uncertainties on availability of raw material or commercial constraints Hindustan Zinc Ltd, has about 17; production share and around .7; mar5et share in the domestic mar5et HZL is also the only lead producer in $ndia $t is one of the lowest cost zinc producers in the world $t is a bac5ward integrated company with its captive mines, supplying +77; of its concentrate re"uirement $ts operations span through the entire value chain F right from lead and zinc ore mining to smelting and refining HZL has an eBclusive control over lead and zinc production in the country thus giving it a competitive advantage
Business Process !he companys core business comprises of mining and smelting of zinc and lead along with captive power generation HZL has always believes in first catering to domestic demand Mining
HZL operates the world:s third largest open=pit mine, and 9orld:s largest Zinc &ine in Rampura 'gucha, Ra>asthan 8ther mines with HZL are located in 4indesar ?hurd, Ra>pura @ariba, ?ayar and Zawar, all in Ra>asthan HZL is one of the lowest cost zinc producers in the 9orld Smelting
HZL operates Zinc and Lead smelters and refineries at %handeriya (%hittorgarh), @ebari (#daipur) G @ariba (Ra>samand) in Ra>asthan with total zinc and lead production capacity of +7 million tonnes ' smelting facility was established at 3antnagar in #ttara5hand $t was initially intended to serve as a smelting facility for 4ilver production, but later Zinc and Lead melting and &
Hind$stan Zinc Limited
casting plants were also established here !he total metal production was ..7,777 tonnes for year 67+=67+0 $t also has zinc smelter in Vizag, 'ndhra 3radesh, where operations have been suspended since *ebruary 67+6
Porter’s alue C!ain Primary Activities
$nbound Logistics
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8perations
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8utbound Logistics
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&ar5eting and 4ales
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%heaper and faster communication with suppliers through 4upply %hain &anagement (4%&) software Raw materials from chemicals manufacturer and heavy duty e"uipment and machines 3ower supply from government $nnovative ways of mining 4melting process $mproving $nventory &anagement Casier to lin5 to global supply chains and outsourcing opportunities E6E mar5eting and sales process
Support Activities
*irm $nfrastructure
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Human Resource &anagement
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!echnology @evelopment
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3rocurement
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Eetter accounting and financial management practices $mproved communication between different departments through intranet Eetter grasp of business trends and mar5et prices through easier access to information 3roviding necessary training to employees #se of innovative methods in mining and smelting #se of procurement of raw materials and e"uipment in a cost effective manner
Hind$stan Zinc Limited
Conclusion !he price trend in all siB L&C=traded base metals so far this year has been higher apart from in copper Zinc is the best performer in the compleB as it was up -; from the start of the year !he three=month L&C price pea5ed at 6,+. per ton in 8ctober, rising from +,2+7 in Ianuary 'lthough %hinas economy faces some ma>or issues including spiraling debt levels and an overheated property mar5et, the countrys outloo5 is starting to brighten F the latest manufacturing 3&$ data surprised on the upside !he $nternational &onetary *und eBpects %hinas growth rate at 26; this year Eut on the other hand steel prices are declining due to the turmoil in %hinas economy Eased on above facts, Hindustan Zinc Limited might face a miBed mar5et
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