Vedanta Ltd

NSE:VEDL

Earnings Call Transcript 2023-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '23 Earnings Conference Call of Vedanta Limited. [Operator Instructions] I now hand the conference over to Mr. Sandep Agrawal, Head, Investor Relations at Vedanta Limited. Thank you, and over to you, sir.

[Sandep Agrawal, executive]

Thank you, Stephen. And hello, everyone. I'm Sandep Agrawal. It's a pleasure to welcome you all to Vedanta 2Q FY '23 Earnings Call. An audio archive and transcript of this call will be made available on our website. The financial statement, press release and presentation are already available on our website. From our leadership today, we have with us Mr. Sunil Duggal, our Group CEO; Mr. Ajay Goel, acting Group CFO. We are also joined by leaders from our key businesses, Mr. Arun Mishra, CEO of Zinc Business; Mr. Prachur Sah, Deputy CEO of Oil & Gas business.

Please note today's entire discussion will be covered by the cautionary statement on Slide 2 of the presentation. We will start with update [indiscernible] on operational and financial performance, and then we will open the floor for questions and answers.

Now without further ado, I would like to hand over the call to Mr. Duggal.

[Sunil Duggal, executive]

Thank you, Sandep. Good evening, everyone. Thank you for joining our second quarter earnings call. You all are aware that the global economy has recently been facing certain macroeconomic challenges emanating from Ukraine-Russia war, broadening inflationary pressure, energy shock, food shortage, appreciating dollar and so on. Most of the central banks have been tightening monetary policies to tame inflation. These near-term macro challenges have weighed down commodity prices during the quarter. Despite these macro challenges, we have delivered strong operational performance with production growth in key businesses and cost optimization during the quarter. We have achieved consolidated EBITDA of INR 8,038 crores. This, along with structural streamlining our working capital investment helped us to generate a robust pre-CapEx free cash flow of INR 8,369 crores. Our center of excellence designed around quality set optimization, digital transformation are helping us to capture full potential of our asset.

Our growth and vertical integration projects aimed at reduced market volatility impact are progressing very well. Now we have 6 coal mines, which have 40 million tonnes per annum plus production potential, along with 2 recently 1 mines. These mines will be more than sufficient to take care of entire coal requirement of aluminum business and help us to make it structurally strong. All these levers will make Vedanta stronger to deliver sustainable and predictable performance across all cycles and create stakeholder value. We remain committed to create value for our shareholders. In first half of financial year, we have distributed dividend of worth INR 51 per share, which translates into a dividend yield of 15.4%, one of the best amount peers.

Vedanta Group is one of the highest contributor to Indian exchequer with INR 37,180 crores contribution in the first half of financial year. In our pursuit to uplift people's life, we have reached the milestone of 3,600 Nand Ghars for women and child welfare. Our BALCO Medical Center has also signed MOU with Tata Memorial Center to drive excellence in cancer care. Our ESG program has been progressing very well. I'm happy to share that Vedanta has entered into the exclusive club of top 10 DJSI ranked global metals and mining companies, ranked 6 globally with strong 14 point score improvement. Under a pillar of transforming the planet, we are on track to achieve 2.5 gigawatt renewal energy target.

We have issued EOI for additional 500-megawatt RE procurement. Zinc Pantnagar is now our first unit to run entirely on the renewable energy. Cairn and iron ore business have achieved third-party assurance for water positivity. We are also making steady progress on waste utilization and R&D for new technologies. In continuation to our industry-leading people practices on diversity and inclusion, we have identified 120 women leaders who are being developed for future CSR roles. We are launching V Shakti, a program for women leadership development in third quarter.

Now let us move to the business verticals. Coming first to the Aluminum business. We completed Jharsuguda capacity ramp-up to 1.8 million tonnes per annum. Our aluminum production grew by 2% Y-o-Y and 3% quarter-on-quarter. Our quarterly COP reduced by 8% to INR 2429 per tonne. We have started Chotia coal mine operation in September 22 to rationalize our coal cost. Our linkage coal materialization also improved from 22% to 55% in the quarter. We now have availability, 3 captive rigs on a daily basis, which move the material or coal from mines to our plant. We continue to focus on volume growth and vertical integration projects to this business sustainable and predictable across all cycles.

Coming to Zinc India. It achieved its best ever second quarter refined metal production of 246 KT, up 18% Y-o-Y, driven by improved smelter performance and better mined metal availability. Silver production grew by 28% Y-o-Y. The operations have overcome quarterly variation and are now sustainably at 1 million tonne per annum plus run rate. The next focus is to achieve 1.2 million tonne per annum run rate in the near future. Coming to Zinc International. Gamsberg recorded highest ever quarterly production of 55 KT with a 43% Y-o-Y increase driven by higher ore production and higher zinc recoveries.

Cost of production also improved through potential operational efficiency. We have successfully gone through learning curve to handle the difficult ore and now operating at about 300 KTPA run rate in the current quarter. With Gamsberg Phase 2 expansion, Zinc International will be among the largest operations globally at 500 KTPA plus size of operations.

In oil and gas business, our average gross operated production was 141 KBOPD. Natural production decline was partially offset by infill wells in MB1 and RG2 field. We are focused on delivery of growth projects. We have hooked up 8 wells during the quarter. OpEx increased by $0.5 per barrel. Q2, $13.5 per barrel due to increase in polymer prices and maintenance activities. We continue to engage with government on special excise duty within the framework of PSC and RSC. I'm pleased to inform you that government has extended PSC for our Rajasthan block for another 10 years.

To establish shale potential, we have partnered with Halliburton and Schlumberger to build pilot wells in Barmer. Our Cambay infill campaign is looking promising. The third well came online in September and has helped increase production from 9,000 to 12,000 barrels per day. The business secured 8 blocks in discovered small fields in round 3 and 1 coal bed bite block in special CBM around 2021 across online and offshore regions. Coming to iron ore, our Karnataka sales increased by 7% Y-o-Y, though prices remained under pressure, you know because of the export duty. Pig iron production was lower on a Y-o-Y basis due to shutdown of smaller blast furnace. The government of India import duty on iron ore, peak iron among others. This impacted our realization and our margin fell 88% sequentially. However, we have depleted high cost inventory quarter 2 and see cost reduction in quarter 3. We successfully started over production in our Liberia mine in July. We are planning our first shipment in current quarter.

In steel, our salable production grew 11% Y-o-Y to 324 KT with the completion of debottlenecking activities as shared in July. EBITDA margin was majorly impacted from export duty imposition, driven steel price decline and high-priced coking coal inventory materialization in this quarter. In Packard production grew 43% Y-o-Y due to operational efficiency. Ferro chrome production were lower by 42% Y-o-Y on account of shutdown taken for relining of furnace and it's debottlenecking, further growth in lined up with 60 KTPA furnace commissioning by December 22 had a CapEx of INR 200 crores, which will take the total capacity of SECL from 75 KT to 150 KT.

In terms of outlook, you may have noted that aluminum, zinc and lead production cuts have been continued in Europe amidst high energy cost. Energy shortage in some of the Chinese provinces is also impacting metal supply. We also expect Chinese government stimulus effort to boost commodity demand, while Indian economy is not fully insulated from the global events, it is relatively resilient, as reflected by strong industrial production, export competitiveness, tax collection, buoyancy and nonfood credit growth.

Indian government increased capital expenditure continues to support demand. Indian economy is projected to grow at a robust of 6.8% in 2023, fastest amongst the major global economies. Following the monsoon, construction activities have restarted and consumer durable market is vibrant now. This augurs well for metal demand in India. India being our largest market, its continued strength bodes well for our business performance. We have an outstanding foundation of world-class long-life and low-cost assets producing vital commodities for global decarburization transition. With a rich diversified set portfolio and strong balance sheet, we remain well positioned to benefit from the global mega trends of decarburization and energy transition and withstand the challenging macroeconomic environment.

With this now, I would like to hand over the microphone to [indiscernible] CFO, Ajay Goel, for the financial performance.

[Ajay Goel, executive]

Thank you, Sunil, and good evening, everyone. The macro offering environment in the quarter was quite mixed with the softening auto prices, input inflation and the various fiscal and monetary policy changes. The Indian economy do is far better positioned compared to global peers. India's outlook has been optimistic towards domestic consumption, which is evident in several economic indicators. The commodity indexes are also plateauing and cooling off in many cases. The impact of tightening monetary policies by Central Bank is likely to bring positive results in coming quarters. This quarter, we have pursued various initiatives, which resulted in strong performance despite input inflation and softening prices on output side. Our businesses have delivered strong quarterly revenue and very robust free cash flow before CapEx which is driven by working capital initiatives where we have reduced the number of days structurally by 15% quarter-on-quarter and optimized inventory. This should continue to benefit us in terms of cash in coming quarters.

Our focus remains on attractive returns to shareholders, with highest ever 15.4% didn't end. Our leverage stays at best amongst Indian peers at 0.7x with a strong ROCE of 28%. I'm happy to share that we are progressing well on deleveraging commitment at HoldCo, which is 4 billion over the next 3 years. We have deleveraged the HoldCo in the first half of the year by 1.4 billion. The Q2 results are very clearly is the reflection of the operating environment and some of the key financial highlights of the quarter are: control quarterly revenue of INR 36,237 crores, up 21% Y-o-Y. Quarterly EBITDA of INR 8,038 crores lower 24% Y-o-Y, with strong EBITDA margin of 25%.

Free cash flow before CapEx of INR 8,036 crores. And you would note that the free cash flow in CapEx for the quarter is more than 10% of EBITDA. So the EBITDA to cash conversion ratio has improved almost 2x of the recent past. ROC of 28%, which is higher by 2% of last year's number of 26%. We continue to maintain healthy cash and cash equivalents of INR 26,543 crores, with net debt-to-EBITDA, the leverage ratio of 0.7x maintained at low levels amongst all Indian peers. And finally, we paid the second interim dividend of INR 19.5 per share, amounting to INR 7,249 crores in the second quarter, which takes total dividend payout for the first half at INR 51 per share that amounts to almost [ INR 19,000, INR 18,933 ] crores, one of the best business paying company in India. We have an income statement in the appendix Page #30, where you can find more information against each line of [indiscernible] account. I wish to state that our ETR guidance for the full year will be around 30% now against 28% earlier. This change is driven by movement in profit mix amongst various businesses.

Now I move to EBITDA bridge. So as clear from the EBITDA bridge quarter-on-quarter, the impact of market-driven factors has been partially set off through better volumes across businesses and lowering of cost impact through several measures on cost with also the input prices also April in second quarter. We were also benefited from strategic hedging, which helped us to some extent in navigating the tenuous pricing. Similarly, if you see the EBITDA bridge Y-o-Y versus last year, the major impact is coming from market-driven factors led by the macroeconomic environment and inflation, which was partly offset by increased operational performance and strategic hedging.

Moving on to the page on net debt. Net debt as of September 30 stands at about INR 30,144 crores. Again, on net debt bridge, as I mentioned at the beginning, through various initiatives, we have improved working capital, which resulted in strong free cash flows before group CapEx amounting to INR 8,369 crores this enabled us to declare interim dividends in second quarter. The increase in net debt in Q2 sequentially quarter-on-quarter is due to amount invested in CapEx in the second quarter through borrowed businesses.

Moving on to the balance sheet now. Our balance sheet remains resilient, providing both protection and optionality for growth. We achieved net debt to EBITDA, as I mentioned, 0.7x, well within the range of our capital allocation framework and best amongst Indian peers. Our average maturity maintained at about 3.8 years with average cost of borrowing at about 7.7%. Our credit rating continues to be at AA with a stable outlook, both by India Ratings and CRISIL, we are investing for future both in terms of value-driven growth and positioning the portfolio for longer-term demand themes while remain committed to capital allocation discipline.

Our CapEx programs are on track as planned. We have spent $0.6 billion in the first half of the year on growth CapEx. On a full year basis, we are revising the growth CapEx guidance for aluminum business to $0.6 billion from $1 billion, which is in line with cash outlay estimates. All growth CapEx programs for aluminum remain on track as planned. With this, full year growth CapEx guidance now stands at $1.6 billion.

I have to share that Vedanta was recently awarded the Golden Peacock Global Award 2022 for excellence in corporate governance. Lastly, I'd like to reiterate, we have an outstanding portfolio of long-term assets and expertise to invest in growth in delivering vital commodities for a low carbon future and continue to pay handsome dividend. We will continue to challenge ourselves and deliver goods across various cycles. With this, I hand over the mic back to operator for Q&A. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Indrajit Agarwal from CLSA.

[Indrajit Agarwal, analyst]

I have 2 questions. First is a 2-part question. First, you mentioned about 40 million tonne capacity of coal blocks that you have won so far. So if you can give us some guidance as to what will be the cost of production of these and what kind of savings we can expect from that. Second part is more near term. You have guided about $2,150 to $2,250 aluminum cost of production for second half, which is about $200 lower than just the current quarter, second quarter. So what would drive this cost reduction is it more like coal availability? And my last question is on the HoldCo level. If you can remind us again what is the repayment view for the rest of FY '23 and also in effect for it, thank you that's all from my side.

[Sunil Duggal, executive]

Thank you. I'll take your first question. So as you rightly said that we have now 6 coal blocks plotted to us. For Jharsuguda, Jamkhani, Radhikapur, coal development. For BALCO, we attach to Chotia Barmer, as we speak today, the Chotia mine is operator and started feeding coal to Balco. Jamkhani is about to commission and start production any day from now. The all regulatory clearances are in place. All the 90%, 95% land is in our hand now, and we are about to put the shovel in the ground. So it will start feeding the coal to Jharsuguda plant very soon. But apart from that, you are aware that the Radhikapur and coal mine, which we had won earlier there is substantial progress, which has happened, including mine plan approval moving for VedEX direction and government clearance negotiation taking place for the land process taking place for the acquisition of the land.

And you also know that in the last quarter, we have won Ghogharpalli mine. Ghogharpalli mine has a mine reserve of around 1.2 billion tonne and the license capacity of this mine 20 million tonne. But this mine has a capacity even to go to 30 million tonnes. So Barmer is a very recent block, which we have won. It is more like an exploration block, but as the data we have, it has a geological results of around 900 million tonne. So this can easily produce 10 million to 15 million tonnes per annum. So in total, it will take a very conservative capacity, it is 40 million, 45 million tonnes. But the full capacity from these mines is around 60 million tonnes.

So even if we have a risk that how much long or what risk is here to make these mines operational, we should be able to get the security of 30 million, 35 million tonnes, not very far out from today. And we have made a year-wise plan that how the mines are going to open up and how the coal will be formed. From the year, it will start hitting the goal maybe from the current year. There is a progressive reduction, which is going to take place. From, say, INR 0.9 per GCV, INR 2.5 per GCV. So there is going to be a substantial reduction in the cost in 3 years from today. This is against current cost of INR 1 or INR 1.20 or INR 1.30, which we have in the current quarter. But we actually work out the power cost at INR 0.5, it comes to somewhere between $3.25 or so per tonne against maybe more than $1,000 of the power cost, which we had in the last quarter. So there is a very solid plan of how the fuel prices are going to be controlled in the coming years. So what was the second question?

[Indrajit Agarwal, analyst]

On the near-term cost reduction in aluminum?

[Sunil Duggal, executive]

Yes. So we have given a very conservative guidance, you must have noticed that we had $240 cost reduction in quarter 2. We are looking at a cost reduction of, say, $300 to $350 per tonne in quarter 3 coming from the various levers. The last quarter, only from the power cost, the reduction of the total reduction to $240, $170 was from power. And I also mentioned in the talk track that now we have 3 captive rigs available with us. With the 3 captive rigs, which are available with us, we are able to move the substantial quantity of coal to Jharsuguda. So this will not only help us to get more linkage coal, but also help us to reduce the logistics cost.

So because the quarter 2, we got the option of moving the coal by a road and although the linkage improved from 22% to 55%, the reduction of power cost to that extent has not happened, which I think will have a much higher impact this quarter. But apart from that, there are other initiatives of the operational efficiency, but the city coke city, pitch prices are also going to get controlled. We have a certain strategy around how these prices will be brought down. And of course, with the depletion of the high-cost alumina and getting into the cycle of cycle where we have the alumina available at current prices currently. So a combination of these 3 factors, I believe that we should have a cost reduction of $300, $400 in the current quarter.

[Ajay Goel, executive]

On the third question, Indrajit, in terms of the HoldCo debt and maybe what we can do, we can look at the total liabilities, which is a combination of loans, bonds, including the interest under cost. So if you look at the current fiscal F '23 H1, the total liabilities are about INR 3 billion. And out of which you may have seen we paid 2 dividends and the balance about the INR 1.3 billion at VRL got refinanced mostly to Indian PUC bankers with the longer-term maturities and the lower cost. So net-net, in H1 against 3 billion liabilities, almost INR 1.4 billion, as I mentioned initially, has been deleveraged.

So in the first half, the variable debt came down from 9.7% to 8.3%. In second half, the liabilities, including interest cost is about INR 1 billion, and which will be again mostly get refinanced. So overall, in the current fiscal, almost INR 4-odd billion, a combination of loans, bonds, interest costs and INR 1.4 billion is deleveraging. Now F '24, again, it is more or less same. So INR 3 billion is liabilities, loans and the bonds with interest costs. So INR 4 billion is a maturity INR 24 million. I just wish to make one point that the F '22 and F '23 most of the VRL did also emanate from the loans taken for increasing the stake, which were mostly unsecured and which is getting repaid in the second half. Coming F '24, most of maturities are from secured buckets, which are easier to refund, net-net for INR 4 billion in both the years and deleveraging of INR 1.4 billion in the current fiscal.

[Operator]

Thank you the next question is from the line of Amit Dixit from ICICI Securities.

[Indrajit Agarwal, analyst]

Congratulations for a good set of numbers and very challenging times. I have just a couple of questions. The first one is on essentially the increased CapEx guidance for BALCO expansion. If you could throw some light on the key elements because it is very unlike of Vedanta to revise cost effort. So if you could throw light on the key elements that has led to the increased CapEx in BALCO expansion that is the first question. The second one is on the car production in oil and gas production guidance. Do you think that you would be able to achieve the FY '24 number that was laid out in the analyst meet in March. So these are the 2 questions I have.

[Sunil Duggal, executive]

So I'll try to answer your first question. And for the second question, I'll also take the help of my colleague and an who is here on the call for Tushar. So the first question is about the CapEx cost revision of the BALCO project. So this is in 2, 3 parts. We -- as you would remember that we had got the smelter project approved with the similar capacity of billet production. So there some CapEx increases there because of the various events which have taken place and the commodity prices from the time it has happened. There is some cost increase, it has happened. But literally, there are 2, 3 things beyond this. One is that the primary foundry alloy project, which was not a part of the bigger scheme of things. And we have seen that what could be the right way or what could be the right product to get the right NEP from the market and the value-added product portfolio should be such that it should be accepted by the market.

So we have planned to add a capacity of 90 KTPA of primary foundry alloy. The another factor here is that rolled products earlier, the sanction was to increase the capacity from 50 KTPA to 130 KTPA. And now we want this capacity to be 180 KTPA. While we are executing the project or rolled product, we realized that it is good to have this capacity. So one 80 KTPA will be the final capacity for rolled product, 80 KT for PFA, 420 KTPA or billet. And along with that, the original capacity of 414 smelter capacity. So this will take the total WAP capacity to more than 100%. So say around 105%. So the -- this will such as the right premium and will also enable us to serve the market in a wider portfolio. And that is why the cost increase on 3, 4 factors, which has happened.

[Indrajit Agarwal, analyst]

Oil and gas production?

[Sunil Duggal, executive]

Yes. So oil and gas production, while we have been able to majorly arrest the decline by doing the project on RDG and well intervention and some production, which has also come from Cambay and Ravva, but more to happen. And as we speak, we have seen some success in the current month. And the next year guidance will be back depending on the acceleration success, but some advantage may also come from ASP and Chile. Of course, this is going to take some time before these projects will realize the volume for us. Prachur, over to you for a little more detailed explanation.

[Prachur Sah, executive]

Thank you, Duggal. So from a production point of view, in Q2, there was a slight impact on production primarily in our NBSX where we had some impact of a polymer breakthrough where we had to change our operating strategy from a chemical to organic reward, but we have overcome that. And we have currently deployed with Schlumberger Halliburton to recover the recovery from MBA and as Duggal Ji mentioned, we have had -- we have drilled offshore now. And in offshore, we have had success in Cambay offshore where we are currently increased the production from 9K to 13K. And the lava drilling campaign in the first well was successful and the second one, which is ongoing or the third one, which is ongoing, is potentially on the line of success.

So in the short term, these are the certain labor that will bring the production back up. In fact, in October itself, we have seen an uptick of close to 6,000 this one. In terms of long term, the exploration will continue. And as you have heard that we have got the extension which will unlock the exploration program, which was kind of held back during the center extension period. So that should bring back the robustness on the building growth as we go into the next year.

[Indrajit Agarwal, analyst]

So in a nutshell, in MBA, the production should come back because these temporary factors are now off the table? Is it the correct understanding?

[Prachur Sah, executive]

Yes. So basically, the decline -- the national decline would be offset by the temporary -- the measures that we are currently taking, which is moving to a more mechanical work over compared to the chemical outcome that was happening, yes.

[Operator]

The next question is from the line of Ritesh Shah from Investec.

[Ritesh Shah, analyst]

2 questions. First question has 3 parts. Sir, first question broadly on capital allocation in ESG. Sir, first is some sort of clarification around the new loan investments into semiconductor business versus advanced rate. What is it that we are looking at the company level at the parent level that's the first thing. Secondly, we have incremental announcements on Athena power and BALCO upstream expansion. How do we manage this with ESG? That's the second on capital allocation. And third, Hindustan Zinc OFS, where are we on the process? That's 3 parts to the first question. And second question is more on debt wish profile that VRL.

[Sunil Duggal, executive]

Okay. So you ask too many questions in 2 questions, and it will imply that. So on semiconductors, I think for that entity, we have already declared that, that does not lie underway, I'm tie up now. And I will not be able to comment on that in this call, although there are hitted the negotiations and the discussions are going on as we speak. And this project is going to hit ground as soon as possible. This was one. Second, you said that...

[Ritesh Shah, analyst]

Sir, so semiconductor expansion won't fall under Vedanta listed entity, is that thing right?

[Sunil Duggal, executive]

Yes. That's what we have declared as of now.

[Ritesh Shah, analyst]

Okay. Perfect, sir, done, sorry sir.

[Sunil Duggal, executive]

Yes. So as far as Athena power is concerned, I don't think the carbon footprints are going to increase because of that. We -- this will actually -- there is a strategic call, which has been based on the power equation, which will be there for BALCO, the one of the option is to feed power to BALCO new smelter depending on the power equation we maintain through Athena. So overall, footprints are not going to increase, but you must have also realized the way we are progressing on renewable power, you may not have heard from any other global player because 550-megawatt already signed with Centrica, and there is a lot of progress which has happened in the land acquisition and tying up of the transmission network and the ordering of panels. And we have also given a alloy of EOI of 500 megawatt for another set of power requirement in all our locations. So this will be more than 1,000 megawatt against our commitment of 2.5 megawatts by 2030. So in 2 years, we have moved at quite a speed.

And apart from that, you might have also heard that some of our units like Pantnagar is completely on renewable power. We have pursued more than 1 billion units of renewable power in the current year already from various sources. So our commitment of ESG is above any question. So we are totally committed, not only on RE we have made a substantial progress on all the pillars and all the aims, and that is why you must have seen that our BGSI rating has jumped by 14 points. And this is the maximum rating, probably you must have seen any jump in any global mining and major mining company globally. We have a full focus on the biomass usage. There are a lot of other ESG projects which are going on. We have started capturing flare, which was going in the city. We have started generating 4 megawatt power out of that. So there are large number of projects which are going on in.

We have also committed that in the period from 2020 to 2030, we will plant 7 million trees, 2 million trees we have already planted in the last 2 years. So against a commitment of 7 million in 10 year, 2 million trees are already planted. So there is a lot which is happening in this space.

[Ritesh Shah, analyst]

Sure, sir. Sir, Hindustan Zinc OFS understanding status check.

[Sunil Duggal, executive]

That is for the government to answer because what you are hearing from the market, I'm also hearing they are going for a road show, and we are quite excited to sell it into the market through the overhead group.

[Prachur Sah, executive]

On the last point, Ritesh, if any answer can obtain?

[Ritesh Shah, analyst]

Sir, I'll just refine the question on the maturity. Sir, you did indicate I think one of the initial questions on $3 billion was taken care of in first half. I just wanted to know the sources for that. And secondly, in FY '24, you indicated 3 plus 1 totaled $4 billion. Just wanted to get a sense on how are you looking to basically fund this? And if you can tie it up with 2 variables. One is the pledges at Vedanta level pledge or incumbent at Vedanta level is already nearly 100%. And secondly, GR2RE, I think you already got shareholders' approval. Are there any other approvals which are pending? And I presume it could be NCLT something else. And if NCLT gives approval, do we still need to go for creditors to get approval for them to actually use those funds towards payouts?

[Sunil Duggal, executive]

Yes. So I'll try to Ritesh one of those briefly. So you're right. So in terms of the H1 current year, our maturity is INR 3 billion. The source remains almost 1.6 was dividend. You may have seen we paid a 2 dividend, the first in the first quarter and the second in the current quarter. So 1.6 billion is dividend, 0.2 is a brand fee. That makes 1.8. And roughly 1.3 is refinancing. Now one significant change in terms of refinancing remains that most of refinancing in the current year first half is done through Indian PSU banks, including SBI, which comes, of course, at a cheaper rate and the longer maturities. So dividend brand 1.8 billion and 1.3 billion in new loans. H2, as I mentioned, is rather small. It's about 1 billion, and we don't see a much change. We are in advanced stage of various discussions with both Indian PSU bankers and a couple of multinational banks. Finally, as '24 is again almost same number, roughly 3 billion is loans and bonds, about 1 billion of the cost. Most of that 24 maturities onwards are coming from the secured bucket, as I mentioned.

And hence, refinancing will not be a challenge. Ritesh, the plan for deleveraging of 4 billion over 3 years remains impact and all other priorities on allocation of capital remains subservient to this goal. Quickly lastly, commenting on Gr2Re vision. You may have seen approvals from BSE/NSE comment from SEBI was taken until last quarter. We also had, as a second last step, one co-convened meeting. So it is NCLT monitor meeting of shareholders, and that vote for conversion was upheld with a refunding majority of 99.9%. Now the last step remains any approval from lenders or secure creators for which we are seeking exemption from NCLT. Once that is done, the whole process will get finished.

[Operator]

The next question is from the line of Pallav Agarwal from Antique Stock.

[Indrajit Agarwal, analyst]

So my question was on the alumina cost for this quarter. So if I look at the cost, it shows it's in excess of $400. So would it make more sense for us to actually buy more external alumina because those prices will be lower than $400 per tonne at least in the third quarter?

[Sunil Duggal, executive]

No, I think the overall alumina cost, the decrease per tonne of hot metal decreased by share on $900 in the last quarter. And alumina and Lanjigarh cost was higher compared to the previous quarter because the previous quarter, the onetime -- the approval was taken by OMC for sale of the additional quantity. And we had some shutdowns also during that quarter. So that differential is there. But in the current quarter, you will see the cost reduction coming up in the next quarter because of the alumina production from Lanjigarh.

[Indrajit Agarwal, analyst]

Okay, sir. So okay. The other thing is, sir, in the copper segment, we've reported, I think, a positive EBITDA. So earlier quarters, you were reporting a loss. So what has led to this improvement over that?

[Sunil Duggal, executive]

So I think we have done a few structural changes here. One is that the overall -- the material, the raw material, we have started purchasing the blister or some secondary material also. And we have mastered the art of modifying our process through which the impurities are being addressed. So this has not only helped us to recover good metal value like nickel has started fetching us some value, which gives the credit to the cost -- but apart from that, purifying this solution gives us improved current efficiency that improved the throughput that improve the quality of the material NEP goes up, the overall capacity is ramped up. So there are many factors which are responsible for that. There are more actions in the pipeline. In the coming quarter, you will see even the improved performance from our Silvassa pant.

[Operator]

The next question is from the line of [ Ashish Kejriwal ] from Nuvama Wealth Management.

[Ashish Kejriwal, analyst]

Sir, my question is again on aluminum because if I'm looking at aluminum, even in the last quarter, when we mentioned the cost reduction in power, we have not seen that kind of cost reduction. And going forward, also the kind of guidance which we are giving in the cost reduction in power, that also does not satisfy the earlier comment also. So my question is on account of coal cost, when we are talking about that it has reduced from 1.9 per GCV to 1.3 this quarter. We have seen cost reduction of just $170 per ton. So when our captive coal also comes and it's come to be 0.56, then how come it comes to be around $325. So this math I'm unable to understand. And second question related to that also, if I'm looking at aluminum different cost of production like in got conversion costs, it is shooting up like $110, $290. So other costs are still on our side. And thirdly, on premium side also, we are seeing that premiums are also coming down. So is it ingot premium which is coming down or the value addition part, which we are -- these are 3 elements on the.

[Sunil Duggal, executive]

Thanks for your question and very relevant question also. So first, if I could come to the power cost. So power cost last quarter was around $1,000 plus -- so this was at an average cost of coal of 1.7, which we are hoping to fall down to say 1.4 in the current quarter. And if the overall power cost at 1.73 is, say, $1,000 odd, you can work out your numbers that if the overall coal cost falls down to 0.56 or 0.7, what could be the number for the power cost?

[Ashish Kejriwal, analyst]

Sir, this quarter, you were talking about 1.73 versus 1.9 in the first quarter or something else?

[Sunil Duggal, executive]

Yes. The first quarter -- the average coal cost was 1.9. Quarter 2, it was around 1.7. And in quarter 3, we are hoping to say around 1.4 or so.

[Ashish Kejriwal, analyst]

Okay. And what was the reason for not achieving our earlier guidance when we were talking about that our power cost will come back to fourth quarter level of something like $800 and which we could not do it in the second. Because in last quarter, you clearly mentioned about this, and we are really surprised to see this kind of reduction in power cost.

[Sunil Duggal, executive]

Look, there are 2 factors for that. One is that the power demand and the coal stocks at IPPs did not go up and the linkage coal realization was not to the extent we had thought, number one. Number 2, even when the linkage core realization improved from 22% to 55%, we had to move a lot of coal through road and which actually hit the cost in real sense, if this coal would have come by rake, which was the original allotted means of moment of the coal, this will have reduced the coal cost to a larger extent.

But now with the 3 captive rates, which we have mobilized, there is a lot of movement of coal, which is taking place through these rigs apart from what is being allotted by the railway. So there is a substantial quantity movement which is happening. But as we speak, there is a -- the stocks in the IPPs and the linkage allocation has become much higher. So a combination of these 2 things will help us to bring the cost down. Although the third factor, we have not accounted for when I'm telling you the cost the Jamkhani coal block operationalization. So depending on how fast we are able to do the stripping and expose the coal. But if we are able to do that, it will further help us to reduce the cost.

[Ashish Kejriwal, analyst]

So sir, just to get clarification from metallization from 22% to 55%, still because of just movement of railway less movement of railways, we were able to reduce cost to a certain extent. So from second to third quarter, when we are talking about reduction, we are assuming that all 55% linkage or whatever that will be rooted through rail or again, there could be surprised going forward?

[Sunil Duggal, executive]

No, not that the total coal will move through rail. Part of it will still move through road, but it will also depend on the rake allotment and the relaxation, which will be provided by the railways. But a combination of our own rigs and the railways, we feel that we should be able to reduce our coal costs substantially.

[Ashish Kejriwal, analyst]

Sure, sure. And sir, next other question is on premium as well as Ingot conversion cost.

[Sunil Duggal, executive]

Yes. So the other conversion cost, the processing cost is majorly dependent on the CP coke and CT pitch. And as we speak, we have been able to bring down the CP coke and the CT prices substantially by 30% or so. This will definitely help us to reduce the processing cost. And on the premium, you know the demand which has eased out in the high premium geographies and a combination of that, we had to tweak the product portfolio along with the slabs and the value-added product. So the combination of the easing out of premium in the market in various geographies and the product portfolio, it has actually impacted our NEP.

[Ashish Kejriwal, analyst]

Sure. And sir, lastly, on alumina, whether we are producing at a lower cost than a purchase alumina?

[Sunil Duggal, executive]

So there was an abrasion in quarter 2, which we hope that it is not going to happen in the coming quarter, which normally does not happen. It also depends the imported alumina landed cost also depends on which cycle we are. And through that cycle, the landed cost -- I mean, there is a lag between the case and the landed and the usage. So the cost is booked on the usage. So with that, I think this is not going to happen. There is always a differential between the imported and the Lanjigarh cost by, say, around $100, $150. So that differential is going to be maintained in the coming quarters also.

[Ashish Kejriwal, analyst]

Sure. And sir, eagerly waiting for your cost reduction initiatives to actually reflect in the numbers. Thanks and all the best.

[Sunil Duggal, executive]

That is our biggest motivation as of now. Thank you, Ashish.

[Operator]

Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to Mr. Sandep Agrawal for closing comments, over to you, sir.

[Sandep Agrawal, executive]

Thank you, Stephen. Thank you all for taking the time out to join us I hope you were able to answer most of your questions. In case you have further questions, please feel free to reach at on me for my colleagues. This has to today's call. We look forward to reconnect with you for next quarter call. Thank you have a nice day.

[Operator]

Thank you. Ladies and gentlemen, on behalf of Vedanta Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.