Hindustan Zinc shares jump over 5%, Vedanta up 3% after govt hikes silver import duty; key details

Shares of HZL rallied as much as 5.43% to ₹676.80 apiece on the NSE, while Vedanta shares gained nearly 3% to ₹313.95.

Days after Prime Minister Narendra Modi appealed to citizens to avoid gold purchases for a year, along with other austerity measures to save on foreign exchange, the Finance Ministry, in a notification, hiked the social welfare surcharge (SWS) and the agriculture infrastructure and development cess (AIDC), effective May 13.

The duty hikes will raise the overall customs duty on gold to 15%.

Impact on HZL and Vedanta

The increase in import duty on silver is expected to benefit metal players such as Hindustan Zinc and, indirectly, its parent Vedanta. This is because HZL is one of India’s largest silver producers. The company produces silver as a by-product while mining zinc and lead.

• Imported silver becomes more expensive,
• domestic silver prices usually rise, and
• local producers such as Hindustan Zinc can sell silver at higher prices.

This means the company may earn more revenue from the same quantity of silver production.

Silver, according to experts tracking the company, is a high-margin business for Hindustan Zinc. So, if silver prices rise, revenue increases, profit margins can improve, and overall earnings may become stronger.

Why Vedanta may benefit

• Vedanta’s consolidated earnings may also improve,
• Dividend income from Hindustan Zinc could rise, and
• Investor sentiment toward Vedanta may strengthen.

Hindustan Zinc is already an important cash-generating business for Vedanta, especially because the parent company has relatively high debt levels and relies on dividends from subsidiaries, analysts note.

• Silver demand weakens sharply because of higher prices,
• industrial consumption slows, or
• global silver prices decline.

Silver prices are also influenced by global economic trends, US interest rates, dollar movement, and industrial demand, especially from sectors like solar energy and electronics.