Hindustan Zinc to invest another Rs 438 crore in group firm Serentica

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Hindustan Zinc has committed an additional Rs 438 crore investment in Serentica Renewables India, a promoter group company, the zinc producer said in its earnings statement for the March quarter of FY23.

Hindustan Zinc chief executive officer Arun Misra told Moneycontrol that a 26 percent stake in Serentica Renewables India 5 was in line with the company’s plan to meet its long-term needs of Hindustan Zinc.

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He said the investment will be in addition to the Rs 350 crore committed in the September quarter in Serentica Renewables India 4.

Misra said Hindustan Zinc is picking stakes in subsidiaries Serentica Renewables 5, with a capacity of 250 MW, and 200 MW Serentica Renewables to be eligible for group captive benefits.

“As a group captive, some of the duties are waived off. And of course, the overall calculation is cost-wise beneficial. That is why we are going with this agreement,” Misra said.

Hindustan Zinc said in September that Serentica Renewables India 4 Private Limited was created for long-term renewable energy power delivery aggregating to 200 MW and this company would hold a 26 percent stake in it. The company committed to Rs 350 crore for the stake, of which Rs 105 crore has been invested so far.

Similar details for Serentica Renewables India 5 have not been made available. The capacities under Serentica Renewables are being developed under the group-captive norms, which Misra said would help with duty benefits.

In the March quarter, Hindustan Zinc entered into a second power delivery agreement with Serentica Renewables 5 for sourcing contracted capacity of renewable power on an RTC basis under a group captive arrangement for 25 years, the earnings report released on April 21 said.

The agreement was for sourcing another 250 MW. As part of the power-delivery agreement, the company will infuse an equity of approximately Rs 438 crore for a 26 percent stake in Serentica 5, it said.

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Anil-Agarwal-promoted Vedanta, which holds a 64 percent stake in Hindustan Zinc, has been facing increased scrutiny by analysts and rating agencies for its related-party dealings, including the proposed sale of assets within group companies and dividend payouts to the parent.

For the related-party transaction for the second half of FY23, HZL disclosed a total value of Rs 1,608.35 crore in 42 different transactions combined. Of this, Rs 788 crore was with Serentica Renewables India 4 and 5.

Among the other related-party transactions reported in the second half of FY23, was a brand fees transaction of Rs 343.32 crore to parent firm Vedanta.

Hindustan Zinc’s net profit for the quarter was down at Rs 2,583 crore, a dip of 11.8 percent from the year-ago quarter. For the full year, net profit was at Rs 10,511 crore, up 9.2 percent year on year, led by higher earnings before interest, tax, depreciation and amortization (EBITDA) partly offset by increase in tax.