This Vedanta group company posted a disappointing set of numbers for Q1FY17 despite zinc and silver prices being on the rise since April’16. This could probably because production itself was down. Integrated zinc and lead production at 101kt and 25kt; down 46% and 11% respectively compared to Q1 FY 2016, in-line with mined metal though  silver production at 89 MT was up 20% (YoY). Mined metal production was in-line with mine plan and guidance with lower production from Rampura Agucha open cast mine as more waste was excavated than ore in accordance with the waste-ore sequence. But obviously this did not get translated into better numbers – net sales was down 30% at Rs.2501 crore. Zinc net sales was down 38% and lead was down 27%. The decrease in revenue was on account of lower volumes, primarily zinc, and lower LME partly offset by higher rupee depreciation and higher silver price. On a sequential basis, revenue decreased by 19% due to lower volumes, partly offset by higher zinc & silver prices. EBITDA for the quarter was down 33% at Rs.1130 crore.

The company has adopted Indian Accounting Standards (Ind-AS) reporting from the current financial year. Correspondingly, comparative periods of previous year have also been re-cast where necessary. Ind-AS also incorporates the IFRS methodology of temporarily capitalising excess overburden in periods of high waste-to-ore ratio in open cast mining to more closely relate the costs to actual production volumes; accordingly, Rs.189 crore was capitalised which will be reversed in H2 FY 2017 where waste excavation is expected to be low.  Additionally, cumulative mark-to-market gain on corporate bonds of Rs.160 crore was capitalised including Rs.66 crore for the current quarter. Change in method of depreciation on Plant & Machinery increased this head by Rs. 171 crore. The net impact of these accounting changes has resulted in a reduction in PBT by Rs.48 crore. The smaller investment corpus on account of dividend pay-out in the beginning of the quarter led to  lower investment income, which along with higher tax rate and higher depreciation resulted in net profit of Rs.1,037 crore, lower by 47% YoY and 52% QoQ.

The company is expected to have a much better year ahead. Earnings are expected to get a boost on account of increase in silver prices, which have been on a climb up since Apirl, up 27%. The company has given a guidance of 500 mtpa production this year, a jump of nearly 10% (YoY).

The company’s net cash and cash equivalents are at Rs.23,349 crore as at June 30, 2016, after outflow of Rs.12,205 crore of Special Golden Jubilee dividend including dividend distribution tax in April 2016.