Vedanta Ltd
NSE:VEDL
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
233.35
516.15
|
Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Good day, ladies and gentlemen, and a very warm welcome to Vedanta Limited Q1 FY 2019 Conference Call. [Operator Instructions]I now hand the conference over to Ms. Rashmi Mohanty. Thank you. And over to you, ma'am.
Thank you, operator, and a very good evening, ladies and gentlemen. I am Rashmi Mohanty, Head of Group Investor Relations, Vedanta. Thanks for joining us to discuss our first quarter results for FY 2019. We will be referring to the presentation that is available on our website.From our management team, we have with us our Group CEO, Mr. Kuldip Kaura; our Group CFO, Mr. Arun Kumar. We also have several of our business leaders with us on this call, Sudhir Mathur from Oil & Gas; Sunil Duggal from Hindustan Zinc; Deshnee Naidoo from Zinc International; Samir Cairae and Ajay Dixit from Aluminum and Power; Naveen Singhal from Iron Ore and Steel; and P. Ramnath from Copper India.Let me now hand it over to Mr. Kaura to provide an update on the company's operational performance. Mr. Kaura?
Thank you, Rashmi. Good evening, ladies and gentlemen. I am pleased to welcome you to Vedanta Limited's quarter 1 earnings conference call. Operationally, this has been a good quarter. We are ramping our production across our business segments and in quarter 1 we made good progress. Volume ramp-up from our underground mining operations at Zinc India and at our Aluminum business continued at a good pace.We see further visibility on our oil production targets. We also completed the acquisition of Electrosteel during the quarter. However, we did have a few setbacks as we started FY '19 with the shutdown of our iron ore operation at Goa and copper smelting operations at Tuticorin.At Goa, given our commitment to the region and the considerable impact on the local economy because of the shutdown, we continued to engage with the government for a resumption of mining operations. Regarding the Tuticorin operation, we have filed an appeal before the National Green Tribunal, Principal Bench challenging the rejection of renewal of [ TTO ] and closure of the existing plant.Our copper smelter is among the best copper smelter in the world in terms of operational performance and environment practices and the plant uses the best-in-class technologies. We'll continue to engage with the relevant stakeholders on this matter.We also delivered a strong set of financials. I am happy to report that quarter 1 EBITDA was INR 6,529 crores, 31% higher year-on-year, with a stable margin of 34%. Net debt/EBITDA remained strong at 1.1 post payout of dividends and the Electrosteel acquisition. We remain excited about our portfolio of businesses as the fundamentals for metal, oil and gas and other natural resources in India continued to be strong.Our commodity prices, despite the pullback in metal prices recently, especially zinc and copper on account of global trade war concerns and the appreciating dollar, we feel that prices will stabilize in the medium- to long-term.Slide on safety and sustainability. Vedanta remains focused on Zero Harm, Zero Waste and Zero Discharge, but regrettably 3 fatalities at our businesses overshadowed our health and safety efforts in quarter 1. Let me assure you that all of us in our executive team are committed to our safety goal and to bring Vedanta to the best HSE performance in the resources sector. We are focusing on enhanced visible leadership on the ground, risk management and use of digital technologies to make the workplace safer and have taken some notable initiatives on training in this quarter.Digital projects on access control and geo-tagging have been launch on a pilot basis and shall be replicated across the organization. Our focus in our environment practices continued to save energy and water and we remain committed to our FY '19 targets.We also institutionalized surveillance program of our tailings dams at all India sites, readying them ahead of monsoons. Finally, on the community front, we started operating the recently established cancer hospital in Naya Raipur, which offers comprehensive modern and high-quality medical care.Moving on to our businesses' operational update. Zinc India. MIC during the quarter was 212,000, lower by 17% from our last quarter. From this quarter, HZL transitioned to fully underground mining. This was completed in a safe manner and underground outputs ramped up by 7% quarter-on-quarter from 197,000 tonnes in quarter 4 to 212,000 tonnes in quarter 1.Metal production was generally in line with availability of mine metal. The ramp-up of Rampura Agucha mine will be accelerated with the recent commissioning of additional ventilation systems and mid-shaft loading platform.Our cost of production ex-royalty was higher quarter-on-quarter due to lower volume, maintenance shutdown costs and impact of resettlements. We remain on track to achieve our 1.2 million tonne MIC target in FY '20.FY '19 is an important year for us as the gap in our production on account of closure of open cast operation will be filled with ramp-up at our underground mines. Our underground mine production will increase progressively every quarter and we are confident of reaching our guidance of surpassing last year's record production and will target a 1.2 million tonne MIC run rate as we exit this year.Major milestones on shafts are on schedule and mill commissioning at SK and Zawar are expected in second half of the year. I'm pleased to inform that we have received environment clearance from MoES for expansion of coal production at the SK mine from 4.5 million tonnes to 6 million tonnes per annum, enabling us to accelerate the production. Phase 1 of our strategic vision to grow our zinc-lead output from 1.2 million tonnes to 1.35 million tonnes is in the planning and evaluation stage.Zinc International. Moving to Zinc International, production was low at 25,000 tonnes mainly on account of a planned maintenance shutdown at Skorpion during the quarter, which was partially offset by improved recoveries at BMM.The lower production volume and Skorpion maintenance shutdown expenses also increased the CoP for the quarter, but we remain on track for our full year cost guidance. At Skorpion, Pit 112 ore mining and metal production is expected to ramp-up from quarter 2 with higher production expected in second half of the year. Going forward, all production at Skorpion will be from Pit 112.At Gamsberg, almost 100% of pre-stripping work has been completed. About 0.5 million tonnes of ore stockpile has been built. The crusher has also been commissioned and crushed ore stockpile is currently being readied.Mill commissioning activities have started and we're expecting the first commercial concentrate production in September after a minor delay due to fatality at the site. We continue to work towards full year production of 100,000 tonnes.I'll now hand over to our Oil & Gas CEO, Sudhir Mathur, to speak about quarter 1 performance. Sudhir?
Thank you, Mr. Kaura, and good evening to you all. Let me start-off with the performance for the quarter. We are progressing well to deliver the FY '19 target of 200,000 to 250,000 barrels per day. With more wells being brought on line, our average gross production across assets was 195,000 barrels per day, 3% higher quarter-on-quarter.The execution of various growth projects involving capital expenditure of over 2.3 billion has commenced. We have 7 drilling rigs on site, which we shall ramp-up to 14 rigs by Q3. MBA Infill, EOR Polymer & ASP Projects are on track. Two wells have been bought online. This will increase to around 16 wells by Q2.We therefore see a substantial jump in our gas production driven by 2 factors. One the GIGL pipeline expected to be bought online in Q2, which shall enable us to increase gas production by 50%. Second, the work on the gas terminal has commenced. In the interim, we shall be deploying early gas production facilities to double the gas production by Q4.We're progressively increasing the liquid handling capacity at the Mangala processing terminal to produce incremental volume. At Aishwarya Barmer Hill, the first of our tight oil projects, the first oil is expected in Q2. We're also investing in exploration. [Technical difficulty]
Sudhir Mathur, you are not audible.
Hello?
Yes.
There's some problem in the call?
No, sir. Sir, Sudhir Mathur is not audible. I'm just trying to -- ladies and gentleman, you are requested to stay connected while we reconnect the speakers. We have the management line reconnected.
So let me start with ABH. At Aishwarya Barmer Hill, our first tight oil project, the first oil is expected in Q3. We are also investing in exploration. Rajasthan exploration campaign consists of 7 to 18 wells. We're well on track for start in the [Technical difficulty].
Sir, I have muted that line. You may please go ahead.
Thank you. Sorry about that. The Rajasthan tight oil appraisal, drilling for 4 tight oil fields is planned for the second half of FY '19. Beyond Rajasthan, in KG offshore, the first year of the 2 well exploration campaign has started in April 18. We're looking to make significant additions to our current acreage under the government's open acreage licensing policy. We have bid for all the 55 blocks on offer. The award is expected in the second quarter. Thank you. And back to you, Kaura.
Yes. So thank you, Sudhir. Coming to Aluminum, Aluminum division continued the strong production trajectory from last quarter and delivered record volumes of 482,000 tonnes and an improved margin of $425 per tonne in quarter 1. The key focus in this segment is on cost and improving realization.During our FY '18 results in May, we have guided to $120 to $170 per tonne savings in our aluminum CoP year-on-year by optimizing controllable cost and elimination of one-offs, while excluding the impact of market factors.Let me provide you an update on this. In quarter 1, we have achieved about $50 per tonne of the saving, driven mainly by improvement of power plant operating parameters, elimination of cost revival one-off and reallocation of cell relining expenses. We have started receiving high-quality Odisha bauxite through OMC for our Lanjigarh refinery and this will be in terms of our bauxites requirement this fiscal.Alumina production of 325,000 tonnes this quarter was lower quarter-on-quarter due to the temporary issues in the bauxite handling unit. However, we are on track to ramp-up production to 1.5-1.6 million tonnes this year with increase in Odisha bauxite. On coal, the focus is on increasing linkages through Tranche IV auction and improving the materialization of current linkages.We're also improving the power plant's operating parameters and GVC loss elimination. With these key cost drivers, we retain the savings target for the year. On the marketing side, we continue to focus on improving net premiums by progressively increasing value-added production from 43% of total sales in this quarter to a 59% exit rate in quarter 4.Electrosteel. During the quarter, we completed the acquisition of Electrosteel under the IPC process. We see this acquisition at an attractive pricing to be a strategic fit to create an integrated iron and steel business. We'll consolidate the financials of ESL for a 10-month period in this fiscal. The ESL plant is located in Bokaro, which is in the vicinity of major raw material sources, including our proposed Jharkhand iron ore mines, which are only about 250 kilometers away from the asset.The plant currently has a hot metal capacity of 1.5 million tonnes and a design capacity to go up to 2.5 million tonnes with additional CapEx. It produces long steel products, wire rods, rebars, GI pipes, billets, et cetera.In the last financial year, the asset produced around 1 million tonnes of output at an EBITDA margin of $55 per tonne. It has been a little over a month since the completion of the transaction and we are in the process of integrating it within our group.Our plan in the near-term is to stabilize production from the assets and to strengthen its various functions such as commercial and marketing, while simultaneously working on ramping up production to its full current capacity of 1.5 million tonnes per annum. Once this is complete, we will be able to substantially improve EBITDA from current levels. This will get us ready for the next phase, which is the expansion to 2.5 million tonnes. In parallel, we continue to work on our plans in Jharkhand mines, which will help create further value with the synergies that are possible.In summary, Vedanta is on a transformational journey with significant growth across its businesses. The key enablers for driving this growth are the use of technology and innovation to drive best-in-class and low cost operations, skill development and global experience leadership to steer the project delivery with sustainability at the forefront.To summarize, Zinc India is on track to gradually ramp-up and is targeting a 1.2 billion tonne MIC run rate at the end of this year. Gamsberg will ramp-up in an accelerated manner once commercial production starts in September. Aluminum ramp-up is on track and we are targeting $120 to $170 savings on FY '2018 average, excluding market factors as per previous guidance.Oil and gas development projects are in the execution phase and production ramp-up will continue progressively. Electrosteel acquisition has been completed and integration is underway.We have maintained our guidance for FY '19 across our business segment. We see growth milestones coming up in the upcoming quarters. We expect the performance to progressively improve as we advance through the last 9 months of this financial year.Over to Arun to provide the finance update.
Thanks, Mr. Kaura. Good evening, everyone. As outlined by the CEO, the quarter saw the company deliver on growth projects, with Zinc India, Gamsberg, Zinc International, oil projects as well as oil output making good progress.Some key highlights for the quarter. EBIDTA growth of 31%, robust margins in the 35% to 40% range, which we've already indicated in the past. Guidance on volume, cost remains unchanged, see the appendix. No change in the full year tax rate, interest income percentage, depreciation trend guidance, as indicated in the May results call.Third highlight would be the [ MD ] ROCE at about 16%, up over last year by 110 basis point, reflecting improved asset earnings. With that, the other balance sheet indicators of net debt-to-EBITDA continues to be robust at around 1.1x. The attributable PAT and EPS is up marginally. It's a play of mark-to-mark on investments and cancelations as we go below the EBITDA.Finally, on the income statement in the appendix, only 2 points worth mentioning, is a one-time charge of [indiscernible], certain commitment charges on the finance fault lines, interest income impacted by the mark-to-mark given the adverse movement in the yield curve. No change however in the full year tax rate, the investment return, income percentage, as indicated in the May results call.Next page on the EBIDTA bridge. It's largely self-explanatory, but I'll focus on the operational side. Volumes. Aluminum and Oil volume growth shored up. Rest of the businesses offset each other, with the adverse impact of the non-operational Copper India coming up as well.Zinc India though lower was largely in line with the mine plan in the absence of open pit at Rampura Agucha. On the cost side, primarily on account of the volume-led absorption of the zinc businesses and change in coal mix in aluminum with more imports and auction pool. The others was mainly impacted by the power import in aluminum and the catch-up on account of Zinc India, the long-term settlement signed with the direct and the indirect labor. But it's not abnormal, but higher than the accounting estimate. Most of these expenses should cease in quarter 2, so largely can be considered as a one-time in quarter 1.On the final page on the debt maturity profile, the company has been very proactively managing its maturities of long-term debt, with all of FY '19 largely refinanced. The company continues to enjoy good access to various sources of liquidity, be it banks or bond market, raised around INR 10,000 crores of debt this quarter largely for refinancing the older maturities, while also part funding the Electrosteel acquisition.Not much of an update otherwise this quarter on the credit ratings. They continued to be solid. The gross rate was constant to March levels, while the net debt was up, primarily driven by the acquisition of Electrosteel as well as converting some of the working capital trade finance products to loan funding, as we also highlighted at the end of fourth quarter. We continue to have around INR 35,000 crores of cash on hand.With this, thank you all and back to Mr. Kaura for the rest of the business section.
Operator, we can now take in the questions.
[Operator Instructions] The first question is from the line of [ Anshuman Atri ] from [ KMG ] Invest.
So my question is regarding the Aluminum segment. There are report of getting bauxites form Guinea through an arrangement and as well as form the local Odisha bauxite. So can we expect a sharper ramp-up for alumina production for backward integration going forward? And on coal, you're seeing more and more coal which you're getting domestically, which is leading to lower power cost. So how do we see the overall coal integration for Vedanta as an entity and on this bauxite?
So as we said that we've started receiving bauxite from the Odisha mines and we are ramping up these mines and the logistic arrangement. And this ramp-up will result in supply of about 1/3 of our bauxite requirement this year from this mine. And this figure obviously going forward will keep on improving as we continue to ramp-up the mine at the higher rates. And as regards -- and the second action which is also happening at the Lanjigarh refinery is that we are ramping up our production to its capacity throughput rating, which will enable us to produce 1.5-1.6 million tonnes this year. But this number will also improve to 2 million tonnes in near future after that. So both these factors will reduce our dependence on imports of alumina as well as bauxite and thereby impact our cost substantially. And as regards coal, I mean, we continue to work with the coal mines to improve the GVC loses, where we have some success already, and also to improve our materialization as per our linkages. And in case of Jharsuguda, we also tried to get additional linkages for our [ captiveness ]. So both these factors along with the better performance of our power plants in terms of specific consumption and also PLF reduce or eliminate power imports all together. All these factors actually will lead to [indiscernible] reduction at the number which I was quoting, about $120 to $170 range.
Sir, was there any arrangement for bauxite supply from Guinea?
We are importing bauxite from EGA and that's in a -- as in a standard long-term contract.
[Operator Instructions] The next question is from the line of Anuj Singla from Bank of America Merrill Lynch.
Sir, following up on the bauxite thing, now what kind of cost saving can we expect from this maybe on a alumina or aluminum front given that obviously the transportation cost as well as the quality of this bauxite is going to be much better I guess. So what kind of a cost saving can we expect?
I mean we can slice and dice this number of $120, $170 per tonne this year, so -- I mean the numbers are really a combination of bauxite import plus ramp-up of our aluminum refinery plus the cost savings in the -- because of the power operations. But overall -- I mean there will be obviously substantial savings because of the logistics cost reduction and the other input costs.
And so the pricing for these contracts -- so these are long-term or they are index-based, what is the kind of pricing mechanism here?
Samir, would you like to respond to this?
Yes. So Odisha bauxite -- OMC, as you know, is the government policy driven by auctions. And of course the bauxite which you get from Guinea, et cetera, are based on indexes which move. The bauxite which you get from [indiscernible].
Sir, second question is on the net debt. During the quarter we saw around INR 6,100 cores of working capital adjustment. Because of this, our net debt has gone up. Does that relate to the copper business? Can you just clarify on that?
Yes, as I mentioned earlier, you see the net debt numbers reported -- our net debt-to-EBITDA continues to be healthy 1.1x, which offers a tremendous strength to the balance sheet and a good headroom from any point of view. The quarterly movement is fundamentally a combination of the Electrosteel acquisition and the working capital representing what I mentioned, some of the working capital products, more specifically the buyer's credit converted into term loans given the RBI actions during the quarter 4 for the industry at large. So that's broadly from a reconciliation point of view. The most fundamental thing of course being, as I mentioned, the ratio of net debt-to-EBITDA. I hope that answers your question.
Yes. So the second follow-up on this is actually, should we expect this to reverse in the ensuing quarters or this is like a statutory kind of thing which we should expect. So the term loans are going to stay high and this is not going to go back into buyer's credit again?
So actually the company as such we have ruled out a significant initiative. While some of this will definitely reserve, but more importantly the company has embarked on a significant initiative of relooking at working capital from ground 0. In fact we have some global partners working with us to do global benchmarking in this and we have benchmarked ourselves to the best in the world. And if we have to be sort of what we term as a ruthless players in terms of being the most efficient to manage our working capital, we believe that there is tremendous potential of anywhere between $1 billion to $1.5 dollars in terms of leaning the balance sheet. So the company make progress during the year and drive some excellence into this whole vertical of working capital management. Having said that, a short answer to your question would be, yes, a lot of it -- we should see some reserve during the subsequent quarters.
The next question is from the line of Sumangal Nevatia from Macquarie.
First question is on the Zinc International business. The Gamsberg mine the restart or the commissioning has been delayed by almost 3 months, but we've maintained the full year volume at 100 KT. Now assuming 6 months of operation, that gives you around 80% utilization on a 250 KT capacity. Can you elaborate how the sharp ramp-up would be achieved?
Yes. So earlier guidance Gamsberg for commissioning was middle of this year and that unfortunately got slightly pushed back because, as I was saying, that certain events and the accident there. And now -- I mean from a mining point of view the mine is fully operational and we have a stockpile already built in it, more than [indiscernible]. And so it's really the concentrated commissioning and ramp-up. Our Capital Day attempt is to make the ramp-up faster and plan it better. And this time which we have got has also helped us in that direction. So what we are saying really is that as a management team we are committed to do it faster than -- first then target 100,000 tonnes or close to 100,000 tonnes.
Second question is with respect to the aluminum CoP. Now this quarter...
Hello?
Hello, hello. Yes, am I audible?
Operator?
Hello, ma'am. Can you hear us?
Hello. I just want to just --
Participants, you are requested to stay connected while we reconnect the management. We have the line for the management reconnected. Sumangal, you may want to repeat your question please.
My second question was with respect to the aluminum cost of production. Now this is I think the first time where cost of production at VAL is almost equal to BALCO, so I just wanted to understand if higher cost of imported alumina is the main factor here. And the second part of the question is the guidance for full year at $17.50 versus first quarter at almost $19.35. So assuming that commodity price deflation does not happen, only from the cost saving with respect to bauxite and coal linkage, what sort of cost of production we could end FY '19 at?
As we were saying earlier in our discussion that assuming no impact because of the commodity prices of alumina and also the coal prices in the auctions, if you keep those as market dependent, our cost saving target is about $120 to $170 per tonne, in that range. And as of now, we are making good progress and we are quite confident that we'll hit this number.
And with respect to the cost that BALCO and VAL being the same, can you share what is the key reason? Is it because of higher cost of imported alumina being loaded at VAL CoP?
I think -- I mean we can get into those kind of details. But as the overall aluminum, we had given you the numbers. I think that should [indiscernible] for you.
No problem. I will get in touch later. Thanks. Thanks and all the best.
Right. Thank you.
Next question is from the line of Ritesh Shah from Investec Capital.
My question is for Deshnee. Any specific update on the South African mining charter, wherein we might need to reduce our stake in BMM and Gamsberg?
Ritesh, can you hear me?
Yes, I can hear you.
Yes. Thank you for the question. I think the version of the mining charter we are dealing with is a much better -- I think a much industry friendlier version than the amendment that was proposed a couple of months ago. So I mean we see that as an encroaching development. If you look at the way the charter is worded now, once empowered, always empowered means that we don't have to go and re-empower stake should Exxaro exit from the asset. So that's also very encouraging. The move is to make sure that we've got more broad based empowerment. So if we are to look at any future transactions, it will be around communities and employees as opposed to getting a BU partner as a replacement to the current Exxaro structure. So I think we are -- as a business, I am encouraged that the charter with government is moving in the right direction. I don't see increased risk. In fact I see a slightly minimized risk from the last time we had the conversation.
The next question is from the line of Amit Dixit from Edelweiss.
Can you please throw some more light on Electrosteel? I mean what kind of exit capacity utilization we can look in FY '19 and FY '20?
See, as we were saying earlier, this just was [indiscernible] and we are integrating it. And first stage is 1.5 million tonnes and then of course some improvements in overall product and marketing strategy. And that's really the first stage. And then of course as the second stage, it goes to I mean 2.5 million tonnes with some balancing equipment and additional CapEx. So -- I mean I think maybe when we come back to you in the next quarter, we will have had the time to understand the operation in much more depth and we'll be able to give you then the right kind of guidance.
The second question is with respect to power cost in Jharsuguda. It has inched up quite sharply. So -- I mean what kind of power cost do you see going ahead in this year?
See in power cost basically we -- I think our power plant operations improvement should take place. So what we -- we have, I mean, certain power outages and our really semi -- I mean, substantial costs comes from in case we have to import power. Otherwise our operations are improving. And going forward really our aim is to get our power cost around $550 per tonne. That's the kind of number we are really looking to achieve as we approach towards the end of this year.
Okay, fair enough. Sir, I have a couple of more question, but I will get back in the queue. Thank you.
Yes.
The next question is from the line of Saumil Mehta from BNP Paribas.
Sir, while we agree that we have a pretty strong balance sheet, but given the [ infinity ] assets what we have, Electrosteel and also news reports on Chhattisgarh -- the GMR assets, how should we look at the balance sheet from a net debt-to-EBITDA perspective? I mean, is there a benchmark wherein at some point in time we will not breach that number in respect to how the lucrative assets are?
I think it's a good question. Now broadly if you see our philosophy and we used to talk a bit about it last year on capital allocation. Fundamentally, a [ run ] on our assets ensures that ROCE inches up so that you produce a good quality set of cash flows and that's been our broad effort if you see in the last couple of years where we have ramped up across all our businesses. And pretty much every dollar of capital employed today barring the few projects being executed is producing returns, which is why the ROCE has also moved up to almost a 15% to 20% range from what usually used to be below 5% a few years ago. So that kind of gives us a flexibility to not only keep strengthening the balance sheet -- please remember that the net debt-to-EBITDA would also mean -- the EBITDA is a variable factor. So as it keeps improving, the balance sheet strength obviously keeps improving further. After providing enough for self-funding or growth CapEx, ensuring enough returns to the shareholders and reducing the gross debt rate where possible, the net debt rightly isn't much of an issue. Any opportunistic acquisition like what we have done in the recent past, coming in at good IRR and good return for the investors would be pursued definitely in the field around which we already operate as a diversified natural resources player. So it should be looked at in that broader canvas and context. And the net debt-to-EBITDA level has enough headroom here, but definitely one should broadly categorize it as a -- AA, AA plus category corporate and higher is what we'd always aim to be in.
I mean, if I were to look at the overall balance sheet deleveraging which has stopped a few quarters back because of some of the acquisitions -- when should we see that again, starting? Do we have any benchmark or timelines in place wherein maybe 2 or 3 quarters down the line we can see some sort of free cash flows...
I used to struggle to answer the question a year ago when it was asked, "Your net debt-to-EBITDA is already so low, right? What else will you deleverage further? And -- which is when we mentioned that we'll -- after taking care of this, any opportunistic cash will always be deployed. So it's the same answer. There's nothing much to de-lever for that, 1.1 net debt-to-EBITDA level. So one should wisely invest into growth CapEx and returns for shareholders, which is absolutely where our focus is at this point of time.
And so my last question with respect -- the $150 cost reduction what we are talking about in the aluminum business, can we broadly assume that the 3 buckets like alumina, coal cost and the other costs will have equal savings? Or you see some of the -- one of the bucket getting higher share of the cost savings?
Well, it's -- basically, it's alumina and power plant and coal, which is the 2 main buckets. And as we said, better operations which will avoid this pot revival of costs, one-off costs of that nature. So if we take everything together, fundamentally it will be the power side which is actually the major part of the saving.
[Operator Instructions] The next question is from the line of Vineet Maloo from Birla Sun Life. Vineet?
Hello?
Yes.
I have -- one question is about Aluminum segment. Can I know what was the cost of brought-out alumina during this quarter and do we expect this to come down based on current prices of alumina?
Yes, I think -- broadly I think the cost of brought-out aluminum keeps fluctuating with the index I have mentioned and really the management's focus is on ensuring that the $150, which is controllable cost as we define it -- where in the first quarter, it's close to about $35 to $50 that's been achieved. And in the second quarter, we find that inching to maybe touch $100 or slightly beyond. And that's where I'll probably pass it on to Samir Cairae if he has any broader comments to make -- while the alumina prices will keep going up and down. Samir?
Yes. I think alumina imported was around $490 per tonne landed. [indiscernible] calculate [indiscernible]. But of course we cannot give any guidance in the future because these are highly volatile calculations as all of you are aware. In fact we focus on what is controllable [indiscernible] alumina production. And of course buying imported alumina as efficiently as we can rather than forecasting the price of that alumina. But currently for the Q1 that was the range, about $490 per tonne.
Sir, what was the number in Q4? How was that moved Q-o-Q?
Q4 was around 500.
Okay. So it's on a downward trajectory?
Downward. But as I said, I don't think we are forecasting what the alumina prices are.
I understand. I appreciate that. My next question is on the free cash flow part. In terms of net debt-to-EBITDA you said that you're fairly comfortable of it and you can't -- you don't see much further deleveraging. So it's now it's a marked shift in your strategy, where virtually we should presume that all of the cash generation you will be investing into projects. Is that a fair understanding?
No, actually let me again clarify the understanding. If you look at the last 3 years of the trends of free cash flow, as you may put it, last year broadly as a group we generated about $1.7 billion, if you recollect the number. Of course taking out the -- some of the buyer's credit that we converted to working capital, the number was a bit lower, stood at 1.1. But otherwise 1.7 on a base of $4.05 billion EBITDA. And the previous year was 1.5 on a base of $3.2 billion and the year before that 1.7 on a base of $2.3 billion. And for us our free cash flow would mean, and as we have guided in the past also, it's post growth CapEx. So we self-fund our CapEx. And what is left after that is for primarily meeting the objectives of either reduce your gross debt further or net debt if you so choose to or returns to shareholders if the board decides as appropriate or as opportunistic acquisitions like -- example -- classic example being Electrosteel, where you have the opportunity to integrate your Jharkhand mine with a ready-made steel asset, probably returning EBITDA to capital in the ratio of 1:5 as in a 5-year simple payback, meaning an IRR of plus 20% that's creating better value for the shareholders. That's exactly how it will be. So there's no hard and fast answer to the question save and -- except that the free cash flow is force funding growth CapEX and will be well deployed towards these objectives, including acquisitions if any, not with the objective to fund the acquisitions only.
Sure. No, I understand. I'm not questioning whether 1.1 is good enough or not. I mean, I'm saying in the absence of any specific target of returning X amount of cash to shareholders and no further target of deleveraging, I must assume that it is growth focus, which includes acquisitions, right? That's why I wanted to make sure.
Yes. I think all the objectives will be balanced. And I would only like to take this opportunity to highlight the fact that we've put in dividend policies in place, which is both at Hindustan Zinc, returning a minimum 30% of its net profit, and at Vedanta Limited, a pass through of Hindustan Zinc plus a 30% of the balance minimum, which is a very progressive dividend policy if you look at it globally actually. And also given a strong dividend return to the shareholders, approximately 7.2% if you look at FY '18 average share price and the dividend paid. So I'll probably leave it at that, balancing the objectives is critical, is always important [indiscernible]...
So just partly -- in terms of returning cash to shareholders, are you also exploring options for buybacks like globally companies who are engaging in or you would say dividend is adequate for now?
Yes, I think those are matters best left to the board. But if there are tax efficient ways of doing it, example a buyback or a dividend, one will always scan the possibilities for that. Idea is always to maximize what return we can provide to the shareholders if we can before the [ leakage ] on dividend distribution tax.
The next question is from the line of Palak Shah from Reliance Life Insurance.
Just a few question. One is on delisting of Vedanta PLC [indiscernible]...
Could you speak up a bit? Your voice is feeble.
Okay. Can you hear me now?
Yes, fantastic.
Just wanted to know regarding the delisting of Vendata PLC, are we looking to support our parent in the same?
See, the delisting is being driven by the parent of PLC, so there is no such link whatsoever. We understand from the news reports that the -- and the [ RNS ] release that the Independent Committee, which is a Board Committee of PLC, has studied the offer and has also recommended the same to the shareholders of PLC. So that's exactly what we know and what we can share on this call. There's no such linkage to any parent.
And secondly, are we trying to enter any new mineral ore or metal? And if the parent, Vendata PLC, looks to enter India, does it have the right to go on a standalone basis or it has to go through Vedanta Limited?
I think -- I mean, we have a fairly diversified portfolio of metals and our main focus is India and brownfield growth in most of these areas. I mean, there will always be opportunities, which we'll evaluate as we go forward. And [indiscernible] lies within our own businesses, for example, in terms of cobalt and areas like that, which we'll look at.
Just my question was referring to the -- in case if merchant mining in coal opens up in India, Vedanta PLC looks to acquire an asset on that basis, does it have the right to go on a standalone basis or Vedanta PLC will acquire an asset through Vedanta Limited?
I mean, if the merchant coal mining opens in India, we certainly will be interested in that and we'll like to obviously supplement our coal requirements via that route, plus of course if there's any commercial possibilities. But maybe, Arun, look at -- put some light on the second part.
Yes, I think Vedanta Limited has shaped up over the last couple of years if you see the simplification process that has happened. Sesa and Sterlite merger came and Vedanta Limited merger has created a behemoth, which is a part of the BSE 50 as well as the NSE 50. In terms of India play diversified and only natural resources sector company in India. So that's a primary vehicle of investment, capital creation, contribution to the exchequer. And that's the way to look at it primarily.
The next question is from the line of Sanjay Jain from Motilal Oswal.
This question is to Mr. Sudhir Mathur regarding Oil and Gas business. First thing is that is there any one-time adjustment in the revenue? And do you think the cost of production is inching up? So the question is that where will it head to over the next few quarters?
No, there is no adjustment to the gross revenue at all. As far as cost is concerned, it has gone up marginally from quarter on quarter and -- but we expect it to be below $7, which is the long-term guidance we have given. But at -- it's really a function of the work over rigs that are being used to bring more wells on line and in production.
Just a little thing. If I correctly remember, you mentioned that exit rate of the production was 200,000 barrel per day in the fourth quarter and we actually did less than that in the June quarter. So -- I mean, where is the slippage?
So we had one shutdown in Ravva, which is a mandatory shutdown which we did for maintenance. We lost a bit of production there. And Rajasthan, we are ramping up production, as I mentioned. So it remains pretty stable. We guided 3% on an overall basis coming also from the drilling program that we are doing from [indiscernible]. Yes. And as we mentioned that 16 wells will be online in Q2 which will deliver -- they would be drilled and completed in Q2 from the current 2 wells. So that should add to the production in Q2.
The next question is from the line of Bhavin Chheda from Enam Holdings.
Sir, in case of the copper business, we had the EBITDA loss. So are we doing anything to reduce fixed cost there? And any guidance on basically a fixed cost number or a loss number till the smelter restarts?
Yes, I think -- see, the copper business, the team is doing a very focused job at the ground level on seeing that the community contacts and the other programs continue. So it's important to keep investing a certain amount of cost there. Having said that, the business is in the process of maximizing the EBITDA possible with the refinery in Silvassa, because that is another asset that we have that we should remember. And then through either the [indiscernible] route or [indiscernible] route, there is always the potential to make $75 to $100 per tonne of EBITDA at that place, where the monthly capacity can go up to 20,000 to 21,000 tonnes per month. So that's the focus area for the management at this point of time. And to your point -- it's a very good thought that you have left with us, can we maximize Silvassa and cover the fixed cost, an excellent thought we'll carry back to the copper team.
And so other question is the working capital increase of INR 6,100 crores on your Slide 21, so what this pertains to?
Yes, I think we addressed this question a little earlier. So perhaps we can get back with the IR team for further replies. I like to give the opportunity to other questions please.
That was the last question. I now hand the conference over to Ms. Rashmi Mohanty for closing comments.
Thank you, operator, and thank you, everyone, for joining us today for the first quarter FY '19 earning call. As always, the Investor Relations team is available and you can reach out to us for any further queries you may have with the result. Thank you, everyone.
Thank you very much. So ladies and gentlemen, on behalf of Vendata Limited that concludes this conference call for today. Thank you for joining us and you may now disconnect your lines.