Silver prices have been on an uptrend since last year. In 2025 alone, silver prices rose 170% to Rs 235,700 per kg. In 2026, prices are already up another 35%, reaching around Rs 315,000 per kg. A core driver of this move is a persistent structural deficit in the global silver market.
Why Silver Demand Is Outstripping Supply
Industry data show that silver demand has exceeded supply for several consecutive years, with deficits building over time. Even as mine production has increased modestly, overall supply has failed to match demand from key consuming sectors.
Unlike gold, which mainly acts as a hedge against economic uncertainty and a store of value, silver has wide industrial use. This makes silver more sensitive to economic activity and technology trends. Major demand segments include solar photovoltaics, electronics and semiconductors, and electric vehicles and battery systems.
These industrial drivers explain why demand has grown faster than supply. A weak US dollar, rising expectations of US rate cuts, and broader economic uncertainty have also supported silver prices. Against this backdrop, Vedanta’s position as a listed proxy to silver has strengthened. Vedanta is expected to benefit from higher silver prices and the proposed demerger.
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Hindustan Zinc: The Direct Engine of Vedanta’s Growth
Vedanta and Hindustan Zinc are the only two listed companies with meaningful exposure to the silver upcycle. The difference lies in how that exposure is structured. Hindustan Zinc produces silver directly and ranks as the world’s fourth-largest silver producer. Its silver reserves stood at 808 million ounces as of FY25.
In line with demand trends, Hindustan Zinc’s silver production has expanded more than 20 times to 687 tonnes in FY25. In Q3 FY26, silver volumes rose 9.7% sequentially but fell 1.3% year on year. Silver realisations increased 85% year on year to Rs 169,376 per kg, while sequential realisations rose 46%.
Record prices supported this performance, with spot silver trading 66.6% above the Q3 FY26 average. Hindustan Zinc’s earnings remain sensitive to silver prices. A $1 per ounce change in silver prices lifts Ebitda by around 1%. With silver prices up nearly 30% so far in 2026, this price trend could lift Ebitda further.
Hindustan Zinc contributes about 40% of Vedanta’s consolidated Ebitda. As a result, earnings growth flows directly into Vedanta’s results. Nuvama estimates show that out of Vedanta’s Ebitda of Rs 42,340 crore in FY25, Hindustan Zinc contributed Rs 17,290 crore.
This trend is expected to continue. Hindustan Zinc is projected to contribute Rs 20,520 crore of Vedanta’s estimated Ebitda of Rs 53,780 crore in FY26. In the first nine months of FY26, Hindustan Zinc’s Ebitda rose 14% year on year to Rs 14,247 crore. Silver now accounts for 44% of its profits.
Hindustan Zinc hedges 10% to 20% of volumes to protect margins when market prices exceed business plans. Vedanta’s profitability is therefore set to gain from this earnings momentum. Vedanta’s recent share price movement indicates growing market recognition of this shift.
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Scaling to 1,400 Tonnes: The Path to 2X Growth
Hindustan Zinc has reaffirmed silver production guidance of 670 to 690 tonnes for FY26 and 700 tonnes for FY27. Under its 2X growth plans, silver volumes are set to rise further. Current refinery capacity stands at 800 tonnes. To support higher output, the company plans to expand existing facilities or build a new 600-tonne silver facility.
Expansion at the Rajpura Dariba and Zawar mines is expected to double silver output. At current grades, this could lift production to about 1,300 to 1,400 tonnes. The company is also upgrading facilities to improve recovery rates. In Q3 FY26, it commissioned a graphite pre-float process. A new lead and silver recovery plant using hot acid leaching is scheduled for completion by Q4 FY26.
Vedanta shares have risen about 15% in the past month to Rs 675, broadly tracking Hindustan Zinc. As Vedanta’s reliance on Hindustan Zinc grows, its earnings sensitivity to silver prices has increased. Silver prices have shifted from a marginal factor to a key driver of consolidated results.
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The Value Unlocking
Beyond commodities, Vedanta is nearing a structural transition. The proposed demerger into five listed entities is close to completion. The process is expected to conclude within the current financial year, with separate listings likely by March 2026 or Q2 FY27.
The demerger aims to address the conglomerate discount and unlock value. Nuvama estimates a sum-of-the-parts value of Rs 806 per share, compared with the current Rs 675. The move is also expected to remove the holding company discount applied to Vedanta.
The restructuring may change how the market views balance sheet strength and capital allocation. Net debt stood at Rs 62,000 crore in Q2 FY26. Net debt to Ebitda has improved from 1.55x in FY24 to 1.37x in Q2 FY26. Management expects this to fall to about 1.1x by FY27.
Stronger operating cash flows and higher dividends from subsidiaries support this trend. As leverage declines, Vedanta’s capacity to retain earnings and improve balance sheet flexibility is set to increase.
At the same time, the silver cycle has entered a later phase. After a sharp rally, the risk of consolidation or a short-term correction has increased. The gold-to-silver ratio has fallen to around 50, below its long-term average of 60 to 65.
Historically, this suggests that silver is no longer priced at a discount to gold. A portion of the re-rating appears priced in. Any correction in silver prices would quickly affect earnings forecasts and valuations for Hindustan Zinc and Vedanta.
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