Vedanta Ltd
NSE:VEDL
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Vedanta Ltd
Earnings Call Analysis
Q2-2025 Analysis
Vedanta Ltd
In the second quarter of FY '25, Vedanta Limited achieved remarkable financial results, marked by a 46% year-on-year growth in EBITDA, reaching INR 20,639 crores. The EBITDA for the second quarter alone was INR 10,364 crores, up 44% from the previous year. Revenue also saw a solid growth of 10% year-on-year, totaling INR 37,171 crores, reflecting the company's robust operational capabilities and market conditions.
The company's profit after tax (PAT) saw an astonishing increase of 230% year-on-year, reaching INR 4,467 crores before exceptional items, and reported PAT hit INR 5,603 crores when including exceptional items. The EBITDA margin surged to 34%, an increase of 900 basis points compared to the previous year, showcasing substantial operational efficiency and cost optimization efforts.
Vedanta continues to strengthen its balance sheet, with net debt decreasing to INR 56,927 crores, a reduction of INR 4,400 crores from the previous quarter. The net debt-to-EBITDA ratio improved to 1.49x, the best performance in the last six quarters. The company reported a notable increase in liquidity to INR 21,727 crores, a rise of 30% both year-on-year and quarter-on-quarter.
The operational performance in non-ferrous metals remains strong, particularly in aluminum and zinc. Aluminum production achieved record highs of 609,000 tonnes in the second quarter, while Zinc India reported its highest second-quarter production of 256,000 tonnes in mined metal and 262,000 tonnes in refined metal. Despite challenges from external conditions, the company is on track for significant production increases and cost reductions in these segments.
Looking ahead, Vedanta anticipates continued strong performance, with expectations of an improved EBITDA run rate of more than $650 million monthly by the close of FY '25. The company is poised for an even stronger performance in FY '26, thanks to the progression of key capital projects across its various business segments. Additionally, guidance indicates that the company is on a trajectory to achieve record leads in net debt-to-EBITDA levels, potentially falling below 1x, thereby enhancing its financial stability.
Vedanta is committing to sustainability, partnering with Serentica Renewables to enhance its renewable energy commitments. The company has increased its renewable energy power delivery agreements to 1,900 megawatts, aiming to achieve net-zero carbon emissions. This strategic focus not only aligns with global ESG standards but serves as a pivotal factor for long-term growth and stability.
Vedanta has successfully completed significant corporate actions, including an INR 8,500 crores QIP for deleveraging, allowing for a reduction in annual interest costs by over INR 1,000 crores. The planned demerger is nearing conclusion, which is expected to unlock considerable value and enhance operational efficiency within the company's key market segments.
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Ladies and gentlemen, good day, and welcome to Vedanta Limited Quarter 2 Financial Year '24-'25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. [Operator Instructions]
I now hand the conference over to Ms. Prerna Halwasiya, Deputy Head, Investor Relations and Company Secretary, Vedanta Limited. Thank you, and over to you.
Thank you, Yashaswi. Good evening, everyone, and welcome to Vedanta Limited's Quarter 2 FY '25 Earnings Conference Call. I'm Prerna, I'm the Deputy Head, Investor Relations and Company Secretary for Vedanta.
On behalf of the entire team, I would like to thank you for joining us today to discuss our financial results and business performance. The transcript of this call will be made available on Vedanta Limited's website. The press release and presentation are already available on our website.
Today, from our leadership team, we have with us Mr. Arun Misra, our Executive Director; Mr. Ajay Goel, our CFO; Mr. Ajay Agarwal, President, Finance. We have Charanjit Singh, who joins us as our Group Head, Investor Relations. We have also leaders from some of our key businesses: Mr. Sunil Gupta, CEO, Jharsuguda, and COO, Aluminum business; Mr. Anup Agarwal, CFO, Aluminum business; Mr. Chris Griffith, CEO of Base Metals business; Mr. Hitesh Vaid, CFO, Cairn Oil & Gas.
Please note today's entire discussion will be covered by the cautionary statement slide on presentation -- on the presentation, Slide #2. We will start with the update on our operational and financial performance followed by the Q&A session.
Now I would like to hand over the call to Mr. Arun Misra.
Good evening, everyone. Thank you for joining today's quarterly business performance update. I'm pleased to address you today to share Vedanta's second quarter and first half of FY '25 performance. The first 2 quarters of FY '25 were marked by growth and operational excellence with a strong commitment to sustainability. As a global industry leader, ESG is at the core of our operations. And as you are aware, we have partnered with Serentica Renewables to secure 1,826 megawatt of renewable energy power delivery agreements. Serentica's ambitious goal of adding 17 to 20 gigawatts of renewable energy capacity by FY '30 aligns with our vision.
In the second quarter, Zinc India expanded its renewable energy commitment by an additional 80 megawatts, bringing our total group commitment to 1,900 megawatts. Both Zinc India and our aluminum businesses have already begun utilizing renewable energy. We are determined to extend this initiative to all our businesses in the coming quarters, steadily moving towards our goal of net zero carbon emission.
We successfully hosted the third edition of the Delhi Half Marathon, an event dedicated to support the cause of Run for Zero Hunger. I'm thrilled to announce that our collective efforts have made a strong impact. Together, we have raised 10 million meals to support children and animals in need through Anil Agarwal foundation.
Our commitment to ESG is recognized globally. We are proud to announce that we have once again secured a top 3 ranking in S&P Global CS Assessment for the year. This marks our second consecutive year of this achievement highlighting our strong ESG practices and reporting.
Now coming to quarter 2 FY '25 key highlights. Moving on quarterly performance, I am pleased to report a strong quarter 2 performance marked by operational excellence. Our quarterly EBITDA increased by 44% year-on-year to INR 10,364 crores. We have delivered our all-time high first half EBITDA of INR 20,639 crores, up 46% year-on-year.
Our EBITDA margin increased by 9% from a robust 25% in second quarter of last year to an industry-leading 34% in second quarter of the current fiscal, driven by our structural cost reduction initiatives and operational efficiency. Our profit after tax before exceptional increased by 230% year-on-year to INR 4,467 crores.
Moving on to operational performance. Vedanta's aluminum and zinc operations continued their industry-leading cost positioning, consistently ranking in the top quartile and decile of the global cost curve, respectively. Aluminum business achieved its highest ever quarterly and half yearly production of 609 kt, up 3% year-on-year and 1.205 million tonnes, up 3% year-on-year, respectively.
Our quarterly cost of production is lower by 4% year-on-year. Despite rising alumina market prices globally, we maintained hot metal costs flat sequentially, demonstrating the strength of our assets, our operational and buying efficiencies. Hindustan Zinc achieved its highest ever second quarter mined metal and refined metal production at 256,000 tonnes and 262,000 tonnes, respectively. We have delivered lowest first half cost in the last 4 years with second quarter FY '25 Zinc India cost of production being $1,071 per tonne. Going forward, we are on a clear trajectory to achieve the lowest full year cost of production in our last 4 years of operation.
In Zinc International business, Gamsberg mine delivered a strong 21% quarter-on-quarter increase in MIC production, reflecting significant progress in operational stability and efficiency. We anticipate MIC production to normalize by the end of this fiscal year, and we are confident in achieving 230,000 tons of total MIC production for the full year in our Zinc International business.
Our iron ore business faced some external challenges in the first half of this current fiscal. Bicholim mine in Goa was unable to dispatch ore due to lack of transportation permits in the first quarter. Heavy rainfall further impacted production in the second quarter. However, we have now secured the necessary transportation permits, and Goa's mining operations are now running at or above our stated capacity. With these developments, we are confident of achieving our annual production guidance of 11 million tonnes per annum from the iron ore business in FY '25.
Regarding growth projects, after delivering a strong performance in the first half of the year, we are optimistic about continued growth and opportunities that lie ahead. In aluminum, a ramp-up of Lanjigarh refinery's Train-1 is progressing well. The current total production run rate is 3 million tonnes per annum as we speak as against 3.5 million tonnes per annum capacity. We expect to fully ramp up Train-1 by December 2024.
We are also on track to commission Train-2 in quarter 3 FY '25 with full ramp-up expected by quarter 1 of FY '26. BALCO smelter expansion is advancing steadily with all equipment orders fulfilled and installations under advanced stage. These developments, along with some volume debottlenecking projects, will enable us to reach a production capacity of 3.1 million tonnes per annum of aluminum with 90% comprising value-added products and alloys.
In Zinc India, 160,000 tonnes per annum roaster at Debari and 1.5 million tonne fertilizer plants are progressing as planned, with final commissioning targeted in the last quarter of this current fiscal and second quarter of the next fiscal, respectively. Zinc International is one of the largest zinc deposits globally. Our Phase 2 expansion project is in full swing with full ramp-up expected during FY '26.
In fact, I'm happy to announce that we have received environment clearance for our underground mine expansion and 300 million tonne per annum ferrochrome capacity. With this, we are on track to become the India's largest ferrochrome producer.
In power, this fiscal year will mark the full commissioning of Meenakshi Power Plant, 1,000 megawatts. Our Board has also approved the project CapEx of INR 5,209 crores for 1,200 megawatt Athena Power Plant. As you are aware, we have already secured INR 3,900 crores in project financing in this project. With this, we are well positioned to generate 5 gigawatts of commercial power within the next 18 to 20 months.
Looking ahead, we remain committed to delivering an outstanding performance in FY '25, driven by our robust project pipeline and strategic investments. Our integration and growth projects are progressing smoothly, and we anticipate achieving these milestones within the next 9 to 12 months.
Our focus on cost reduction has been a cornerstone of our profitability. Through our structural interventions and initiatives, we have significantly reduced our cost of production over the past 12 to 15 months, and we are confident in our ability to continue this trend in the coming quarters. Our demerger process is also progressing well, with the first NCLT hearing successfully completed.
In summary, we have continued our strong performance. Building on the momentum from the first quarter, we are proud to report our highest ever first half EBITDA of INR 20,639 crores in this year. The second half of this year will be a transformative period as our major projects come online and ramp up going up. Going by the historical trends, where the first half typically accounts for 40% of the total annual EBITDA, we anticipate achieving our highest ever annual EBITDA in FY '25 by delivering the remaining 60% in the second half.
In Vedanta, we remain committed to our long-term vision of sustainable valuation. By focusing on our strategic priorities and leveraging our unique capabilities, we are well positioned to capitalize on emerging opportunities and deliver sustained growth.
Over to you, Ajay.
Thank you, Arun, and good evening, everyone. This quarter stands out as most remarkable one with considerable advancement in our corporate actions, robust financials and highly effective operations. I'm very pleased to announce that we have achieved our highest ever H1 EBITDA of INR 20,640 crores, a 46% growth Y-o-Y and second quarter EBITDA of INR 10,364 crores with a 44% Y-o-Y growth. This is driven by structural and sustainable cost optimization and supported by favorable prices.
Y-o-Y comparisons focuses on core performance and excludes the onetime gain from Cairn arbitration that we recorded Q2 of last year. In this quarter, our PAT before exceptionals is INR 4,467 crores, reflecting 230% growth Y-o-Y. So I repeat it is a 230% growth Y-o-Y. And with the addition of exceptional items, our PAT reported reached INR 5,603 crores.
Let us now turn to a few of the financial highlights for second quarter. Revenue for second quarter at INR 37,171 crores, 10% growth Y-o-Y. EBITDA, INR 10,364 crores, marking a 44% growth Y-o-Y. EBITDA margin at 34%, an increase of 900 basis points Y-o-Y, which is an industry benchmark. Our net debt to EBITDA ratio further improved to 1.49x, the best in last 6 quarters for Vedanta. Also, our ROCE stands at 23%, up 152 basis points Y-o-Y. And finally, the free cash flow, pre-CapEx, at INR 8,525 crores, reflecting a 50% growth Y-o-Y.
Moving on briefly to balance sheet and debt. I'm happy to report that our net debt as of September end has declined to INR 56,927 crores, marking a reduction of INR 4,400 crores versus Q1. So this is sequential. We finished the quarter with a liquidity position of INR 21,509 crores (sic) [ INR 21,727 crores ], reflecting an increase of 30%, both Y-o-Y and quarter-on-quarter with an average maturity at 3 years.
On corporate actions. In July, as you have noted, we raised about INR 8,500 crores via QIP, which is the largest issuance in metals and mining in our country. The funds from the QIP will deleverage Vedanta Limited, thereby reducing interest costs by over INR 1,000 crores annually.
In August, we further augmented our capital base by raising $400 million through Offer for Sale for Hindustan Zinc Limited. And while all this have been well noted by rating companies, and ICRA has raised our long-term rating from AA- to AA and Crisil revised its outlook to watch with positive implications while reaffirming our AA- rating.
On VRL, I'd like to highlight the significant progress in deleveraging our parent company, Vedanta Resources Limited, VRL. Over the past 2.5 years, we have reduced debt by $4.7 billion, bringing it down to $4.8 billion, which is lowest level in a decade. I repeat, the VRL debt at $4.8 billion is the lowest over a decade.
In H1 of the current year, which is April-September, VRL debt has come down by $1 billion. So we are ahead on our commitment of $3 billion over 3 years. So we are doing more, and we are doing earlier. Additionally, in the current quarter, we refinanced at Vedanta Resources, $1.2 billion bonds. Of this, the last trench came at 9.99% yield.
Overall, this refinancing is 3% lower cost, resulting in annual savings of over INR 300 crores. With VRL's ongoing deleveraging and other actions, such as refinancing, the parent company will have a single digit cost in the near future with interest obligations at VRL will be covered through brand fee, while the principle will be financed through a routine dividend. This will ensure that VRL in future is self-funded.
On demerger, the demerger, as we have noted, in its final stages with shareholders and the creditors meeting planned in coming months, set to unlock significant value and enhance our leadership in critical minerals.
In summary, our EBITDA for the first half at group level stands at about $2.6 billion. Historically, our second half has accounted for about 60% of our annual performance. So we expect a single trend in the current year. Besides the linearity between H1 and H2, there are other key businesses such as zinc international, iron ore and steel. They will see an improved momentum in the coming months.
As you have noted, several major capital projects are set to reach completion across key business segments, and our growth momentum will further carry forward into next fiscal. We will have a monthly EBITDA run rate of more than $650 million as we close FY '25 in the current year. Given these developments, one may expect an even stronger EBITDA in FY '26 next year. We will share further guidance on our FY '26 outlook later in the year.
In conclusion, I'd like to reaffirm our commitment to 3 key areas, which is business delivery, deleveraging and demerger. Thank you.
And with this, I hand over to operator for Q&A.
[Operator Instructions] We'll take our first question from the line of Amit Dixit from ICICI.
Congratulations for a good set of numbers in a very trying quarter, I would say. Couple of questions from my side. The first one is essentially on aluminum cost. So if I look in this quarter, the hot metal cost is $1,734 per tonne, our guidance for the year is lower. But alumina cost has surged. So what confidence we have in meeting the alumina cost guidance -- sorry, aluminum cost guidance in this backdrop?
Our aluminum, CFO Anup Agarwal, to respond.
So thank you, Ajay. So, Amit, to your question, so you may have seen even in this quarter while the alumina cost has been higher, you will see that on the power and the other costs, we have shown a lower number. Going forward, the near-term opportunity lies in Lanjigarh expansion. The work that we have done on our assets that will give us further reduction in terms of the power cost and the operational efficiency. So, Amit, what we've done is we have kept the target the same, $1,725 -- $1,625 to $1,725. In H1, we have done $1,725, and we believe that in quarter 3 and the quarter 4, we will be back to the lower cost levels, which will maintain our cost guidance at the same levels.
No, the question was more in the line because alumina prices have surged in the recent time, so maybe the inventory that you might have had for imported alumina would have kept the cost a little bit lower in Q2. But going ahead in Q3, when that complete impact will hit us and coal mines are still some way away, so that's what I was wondering that how can you maintain the alumina cost at similar level as Q2?
So, Amit, let me reiterate. You are right. See, the alumina prices had increased bought out alumina. Let me reiterate that as we go into Q3 and Q4, Lanjigarh ramp-up is coming into the view. Arunji mentioned that our present run rate is somewhere around 3 million tonnes, almost 30%, 35% higher than what we have done in the first 2 quarters. So the cost opportunity lies in Lanjigarh ramp-up.
As I mentioned, on the power side, first 2 quarters, we have done major repairs and maintenance. We will now have the benefit of it, where we -- you will see almost $40, $50 lower. So, Amit, basically, we will see a bought out alumina prices, which will be higher, which will be to an extent or mostly off-setted by power costs and the other costs. And of course, on the alumina, let me also tell you that not all our contracts -- bought out contracts are market linked or the API current cost linked. There are also some contracts which are linked to the alumina and that will give us the benefit.
Understood. The second question is on oil and gas. So is it possible to give some more detail about the progress of ASP injection? In Mangala well pad, we have taken some write-back of impairment that we took earlier. So how much more impairment can be write back based on the current progress? In particular, ASP injection progress would be something that I'm looking for. And also whether we expect this decline in Mangala oil -- MBA oil fields rather to be arrested in this year?
Sure. So let me start with the first, the Cairn impairment part and request my colleague, Hitesh Vaid, I guess, he could comment on the volume one. So as you know, Amit, in terms of impairment exercise across the business verticals between the carrying value on the balance sheet and with the cash flows. This exercise is quite routine, and they are semiannual. We do it at least twice in a year. So it is part of the same process, September and the March end.
Now for enhanced oil recovery, Vedanta Oil & Gas has commenced injection of ASP in few select fields in Mangala fields. Now this program of injection of ASP is working out well. It is also policy to increase to other areas. This has led to accounting for higher resources in the entire valuation model. That is one part.
Secondly, as we know, by looking at the valuation of an asset, there are a dozen other factors, example remains the cost of capital, tax rate, discount to Brent, gas prices, all of those. Looking at all the factors, we have taken an impairment reversal in the current quarter. While making a provision, one has to be conservative. And when we write back a provision, we are doubly conservative. So the entire write back has a tinge of conservatism on write back.
And in terms of the volume, I will request Hitesh Vaid to see if he could comment.
So ASP has been one of our key projects, which we have been trying to implement. What we have done is we have started injecting in a couple of well pads in Mangala. In parallel, we have also awarded a contract for large-scale execution across the cluster of Mangala well pads. So while the current injection has already started, and we'll start seeing some gains in the next 3 to 6 months, the larger project we take is also on where we will start injecting in around 15 to 18 months time across all the well pads.
So ASP is one project which we were talking about. Now it is being executed on ground. And of course, as we have said earlier, the ASP project is going to lead to an increased recovery of around 10%, which we'll translate across MBA fields to increase recovery of more than 200 million to 250 million barrels. So that project now is on the ground running, and we will start seeing some reversal of the decline which we have seen in the past. But this is one part of the story as far as oil and gas business is concerned.
So beyond the ASP as well as the infill wells, which we are drilling through, manage decline. What we are also doing is on the East Coast, we are working on a 5-well exploration campaign, and that will -- we intend to start somewhere in March. On the West Coast, we are again starting up drilling campaign from December 2024 onwards. The rig is being mobilized. And that program targets 5 increments.
In addition, we have a DSF field in the West Coast, Cambay, which we had acquired some time back. So we are trying to put that also into production, which will happen once we complete this 5-well program. There will be a continuous drilling program. So to get that also in line, in parallel, what we are also trying to do -- I mean, one of the most exciting prospects which we have is our deep water East Coast prospect.
We are looking for partners. It has material volume. We believe it is in excess of 5 TCF. And that's why our plan is to spud the well in a year's time. We have 3, 4 discoveries in that block. So we are trying to monetize that discovery as well as bring in new partners who can help us with further exploration. So that's the whole story. But yes, the ASP injection is the key. We have already started, and we will start seeing gains from the project.
We'll take our next question from the line of Ashish Kejriwal from Nuvama Institutional Equities.
Many congratulations for the great set of numbers in this time. Sir, again, my question is also on aluminum. You said that we can overpower the alumina -- rising alumina price by reducing power cost or increasing our aluminum volume. But even after that, one thing is that how our power cost will reduce $40, $50 when -- either you are saying that such a power will increase or e-auction prices are on a higher side.
And secondly, in terms of alumina, when you are talking that we have delivered around $813 per tonne cost in this quarter, so do you think that we can manage going forward also with the help of captive alumina as well as you mentioned that we have a contract also in alumina? So this math, if you can explain in detail, which can give us a comfort or confidence on maintaining our guidance of overall $1,725, that will be great, sir.
Ashish, Anup this side. So Ashish, first let me come to the power cost, okay? So as I said, in the first 2 quarters, we have done major repair and maintenance in our assets. And as we look at it, there will be a cost to the tune of $40, $50, which has gone in the pond.
And to your question on the coal, both the linkages and our captive coal now constitutes around 85% of our total coal consumption. And in MCL e-auction, premiums are nil. So you will see that is what gives us the confidence that once the monsoon is also over, we will get the better coal grades, and the coal cost would be $50, $60 lower. So that's 1 point.
The second point on your question on the alumina, so I agree that maybe a month or 2, we may see a higher alumina cost. But as I said, that as we go forward in the quarter 3 and quarter 4, the Lanjigarh expansion, we -- I'll reiterate that we are running at a capacity of 3 million -- that's a run rate of 3 million tonnes. And we will also start commissioning the Train-2 in the month of December.
So as we exit the year, we will almost be at a run rate of, you can say, 4 million tonnes with our old alumina. And, of course, some long-term contracts at a lower price, as I said. We believe that quarter 4 costs would offset, if at all, some cost inflation is there in the quarter 3. So that is what, Ashish, gives us the confidence that we should be able to meet the $1,725, $1,750 guidance is what we believe.
Great. So you mean to say that we are already -- so October month also, we have run at a run rate of 3 million tonnes in alumina plant or this is as of today you are saying?
Yes, yes. So, Ashish, let me tell you, and I'll reiterate what we said in the last call also that we've been running with some shared infrastructure, okay? Those shared infrastructures were in terms of red mud handling system, alumina handling systems and the bauxite handling system. So in the month of October, one of those have come into the line, that is the red mud. We will have the alumina handling system coming into line this month, the first mid half, and that is where the capacity has gone up to 3 million tonnes. So current capacity, as we are running today, is at 3 million tonnes, around this.
Sure, sure. That's helpful. Secondly, on coal blocks because now we have been hearing it for last 1 year now that we are on the verge of commissioning of this coal block. So is it able to understand that, when can we expect now and where we are actually on receiving the approvals?
Yes. So our aluminum sector CEO, Sunil Gupta, is on line. I will request Sunil to comment on this question.
Yes. For the coal block, like the Kurloi coal block is at advanced stage now. We are on the verge of getting the forest clearance. We have already done the public hearing, and everything is done. We have started acquiring the land also. Government land is already allotted. [indiscernible] is already allotted. So Kurloi coal block, we are expecting first quarter of '26 it will get operationalized and which we are trying to ramp up by third quarter of '26.
The Radhikapur, we are already -- we have already got the forest clearance. We are in the process of land procurement there. And this is also expected that -- we are trying to operationalize it for first quarter of '26.
And for the Ghoghrapalli, we have already got the vesting order from the government. We have started the approval process from the government, which we are targeting by fourth quarter of '26 it gets operationalized.
Okay. So sir, in terms of...
We are on track in this.
So Radhikapur or Kurloi, do you think that -- any further delay in that? Any other things which can struck us and this Q1 can become 4Q FY '26?
Right now, I have -- this Kurloi mines, I am very, very clear that it will get started in the first quarter of 2026. Radhikapur also we are on track. And only because of some election -- central election, it got delayed, some process. Otherwise, we -- again, it has picked up. So I don't see any delaying -- further delay in the opening of the coal blocks.
Understood, sir. And sir, lastly, about our demerger, where we stand? Do we think that we can still manage to complete the process by FY '25 and/or there could be some spillover? Or is there a possibility that we get approval for one of the companies and not for all and then we can't demerger all?
Ajay, you would like to answer?
Yes. So thank you for your question. We are very confident that this whole demerger process is in the last leg of completion, and we are very confident that this will get done on or before 31st of March 2025. Our scheme is extremely flexible, and it allows us, as and when each of these companies gets approval from NCLT and along with creditors and shareholders approval, has the ability to get listed as and when we have the approval.
We'll take our next question from the line of Sumangal Nevatia from Kotak Securities.
My first question is on aluminum. So during the quarter, we had an accident at red mud pond at Lanjigarh. Just want to understand what was the impact. Is everything in on -- I mean, running regularly now? And what was the financial impact also of some compensation which we read in the news articles?
I'm Sunil Gupta. So for the Lanjigarh water pond breach, there's no impact on the operations. When it happened, we did not have any interruption in the operation. We are running our Lanjigarh plant as usual. There was only some part of the land which got affected, which has been already calculated, and it has been given back to the villagers. We had already paid to -- we had already reimbursed some compensation as advised by the district administration. As such, there is no financial impact because of this pond breach.
Now we have already taken steps to, again, repair of this pond, water pond. And IIT Roorkee has been engaged in that, and we have already engaged one third party for the review of the design. So...
Sunil, Arun Misra here. The first clarification is it is not the red mud pond. It is an in-process water reservoir. And these reservoirs are normally empty through the year. It gets filled up only in the monsoon. And this time there was an unexpected rainfall over a short period of time that caused the overflow and caused the water to go out. That has -- I mean, our people were so alert, it was quickly checked in time. Whatever little damage to the paddy fields happened that could be recovered.
And now we are ensuring that what is the excess amount of rainfall water it can accommodate. To that account, we are putting global experts into the redesigning of the process water pond. Normally, we don't need to increase the capacity, but we will ensure that last 50 years highest ever rainfall, we should be able to protect ourselves, and that is the kind of global standard we are trying to adopt now.
Understood. That's great to hear. Next question is on alumina production full-year guidance. There has been cut versus what we had guided at the start of the year. So just want to understand, is it because of delay in line to Train-2 or some other reason?
Sumangal, see, as I said in the beginning, that we were running with some shared infrastructure, you're right. So we had some delays there and not held by the unprecedented rain that we saw. But I think that is now behind us. And quarter 2, we will see almost 30%, 35% better production compared to the H1. But yes, in the beginning of the year, the guidance that we had given, we are now revising our guidance slightly lower.
Understood. And given that, sir, you commented that end of fourth quarter, we will be running at 4-odd million tonne run rate. So from next year, should we expect -- I mean, somewhere in the range of 4 million to 5 million tonnes of production? And do we -- I mean, what's our bauxite sourcing breakup for that?
Sumangal, so let me tell you, as I said, that we will start commissioning the Train-2 by end December, early January, and we expect that by June, July, we should be able to fully ramp it up, okay? So to that extent, the math if you will do, you will get where we will have the alumina.
Coming to the bauxite. As we said in the beginning that Sijimali, we are seeing a good traction now. And we expect that in quarter 1 next year, we should start the mine. And to the bauxite requirement, we feel that OMC -- and OMC is also expanding its line, between OMC, Sijimali and maybe some other sources, we should be able to tie up the entire bauxite requirement for the next year.
Understood. I just wanted some more -- I mean, some details on the coal mine. So Radhikapur, FC2 was spending as far as I remember. So have we secured FC2 for Radhikapur? And also what is the status of Ghoghrapalli? Is the mining plan or EC, FC being secured there?
Sunil, you would like to answer that one?
Coming to Radhikapur, FC2 still is in process. We are targeting that within couple -- within 1 month time we get it. Ghoghrapalli, like I said, we have already received the mining plan and lane schedule. Now we have submitted for the approval to the government authorities.
Okay. And sir, Sijimali, I think mining plan is approved, but what is the status EC, FC at Sijimali?
Sumangal, Sijimali, already we have done the public surveying and the gram sabha. We are -- we have applied for the FC1. We are expecting that FC1 is -- we get by this month or by 15th of December. So Sijimali is already on track. We have already acquired 800 acres of government land, so this is schedule [indiscernible].
Understood. If I may just squeeze in one more question on VRL. One is we had the ICL due, I think, by end of this year, December. So are we on track to receive that outstanding intercompany loan from VRL? Number one. And number two, at $4.8 billion net debt, what is our interest obligation? And also, are we looking at ending this year lower? Or has there been some front-ending of payment, I think, from a [indiscernible] perspective in the quarter? So for this year, is it possible to guide what is the end target for net debt at VRL?
Sure. Maybe I'll start with the last first, Sumangal. And as you will recollect at the year beginning, we guided the market that the VRL debt we further deleveraged $3 billion over 3 years, starting this year's 1st April. And in the first half alone, we have deleveraged by $1 billion. Now how much more we can do? As you know, in the second half, the requirement is almost $220-odd million between now and December and plus interest almost equal value. We believe most of the second half requirement will be met through free operating cash flows. So one may look at a number of more about $4.6 billion or so at VRL once the year is closed.
Secondly, in terms of ICL between VEDL and the Vedanta Resources, the last tranche, almost $417 million is due towards year-end. It will get serviced as we come close near to the maturity. The past couple of installments have also been serviced. So we'll address as it becomes due in third quarter.
Finally, in terms of interest costs, the second half requirement is almost over $190 million, and we believe our next year requirement will be almost $550 million to $600 million. I'd also like to present the bigger picture for Vedanta Resources very briefly. So the $4.8 billion requirement, as of now has 3 components. It has bonds worth $3 billion. It has $1 billion worth of bank loans, and the remainder $850 million is PFC, the private facility from StanChart.
We will refinance all the bond's tax between November and January over next 3 months' time. The bank loans will get refinanced, repaid as and when they become due. And finally, the PFC from StanChart, next installment is due sometime in April. It will be at this half $400 million by the brand fee in April. So net-net, overall by end of this fiscal or early Q1 next year, the cost of funding at Vedanta Resources will be single-digit debt, give or take, $4.5 billion.
In that case, the interest obligations at VRL will be met through a routine brand fee, and hence, the operating profit and loss account at VRL will be self-funded. With bond refinancing done in the last couple of months and a more in the offing, the maturities at VRL going forward will be $700 million or so. And that principle payment can be easily taken care of by a routine dividend with 5%, 6% yield. Net-net, VRL starting next year will be self-funded in equilibrium, both P&L and the balance sheet.
Yes, that's a great turnaround. So thanks for this detailed explanation, and congratulations on this. I am done with my questions. All the best to the team.
We'll take our next question from the line of Ritesh Shah from Investec.
Couple of questions. First, I'll just continue with VRL. Sir, just a clarification, when we say this $4.8 billion, is this including ICD and whatever we have outstanding on KCM? If not, including both these variables, what the number would be?
Okay. So the $4.8 billion, Ritesh, is external debt. So it does not include the intercompany loan. And when we speak of numbers of [ $4-point billion ] some deleveraging. So it is all asset level, so $4.8 billion plus $0.4 billion, $5.2 billion is total debt.
And do we, sir, have anything outstanding at the Konkola Copper Mines? I think there were some operational creditors, which were taken care of, and there was some initial incremental commitment of $1.2 billion over a few years. Is that a part of debt or something that we have -- we are looking at, at VRL level?
So the $4.8 billion includes everything, Ritesh. So it includes everything.
Also, Ajay, we have got Chris, who is our CEO of Base Metal. He can you a better update on the operational status of Konkola Copper Mines and the way forward. Chris?
Thanks, Arun. Just for the fundraising for $1 billion over the next 5 years, that's still work in progress. So that doesn't add any debt to VRL. At some point in time, as we raise that to complete the investment, that will be then -- that will be debt at the KCM level depending on where the investment comes from.
But perhaps I can just mention that, as you well know, we got the asset back in August. So from September, where we started heating up the plant, we did just over 1 kilotonnes of copper in September. October, we were already at 8 kilotonnes. So this month, we should be at 9 kilotonnes. We should be at a run rate of about 15 kilotonnes per month by the end of the financial year. So this year, we should already in the 8 months of production produced around 80 to 90 kilotonnes of copper and be a run rate -- an annual run rate of 150 kilotonnes already by the end of 8 months of production. And that's kind of the level of production that we were producing before the liquidation 5 years ago. So a very rapid ramp-up on the back of us taking over the production.
And as many of you know, this truly is one of the spectacular copper ore bodies globally. So as we finish the investment over the next 5 years of $1 billion, that's on top of what has already been invested in KCM of $3 billion. So low capital intensity investment, quick ramp-up in a high-grade, long-life ore body. So as we're speaking to potential investors in KCM at the moment, so we're seeing lots of interest in this ore body. There's, of course, a lot of interest in copper. There's a lot of interest in Zambia. And even more so fantastic interest into KCM. So all round, actually things are going very nicely, notwithstanding a couple of small hiccups, but really good rapid ramp-up that's happening at KCM as we speak. Thanks, Arun.
Sir, just to come back to VRL. Sir, I just wanted to -- can you highlight the majority broadly for second half of this fiscal and next 3 years?
Sure. So if you look at the second half, between October through March, so October, it was taken care of. What we need between now and the March end, the principal is almost $0.2 billion. It is about $220 million requirement, and interest almost same number. The requirement at Vedanta Resources in second half is almost $400 million.
As I mentioned, we intend to address most of it through operating free cash flows and maybe a very small portion through refinancing, so self-refunding. If you look at next year, FY '26, the requirement is almost $820 million in principal and interest, so give or take, $1.2 billion, $1.25 billion next year. I would say the outer years, at '27, let us park for the moment because we also intend to refinance the remainder bonds. In that case, the maturities will be degutted and get flattened out.
And sir '27?
'27, as I mentioned, right now, it is about $1.1 billion. But once we refinance the remainder bonds, it will come down to a sub-billion. So $0.4 billion in the current year second half, $820 million next year and about $1.1 billion in FY '27.
This is useful. So that was the first part of the question. Sir, secondly, would it be possible for you to indicate broadly on what's happening on bauxite globally, specifically touching upon Guinea and why there is so much of hue and cry in the global bauxite market? How do you see this playing out over, say, next 6 to 9 months? That's one.
And second is very encouraging to see that our alumina refinery is ramping up well. But just wanted to understand what is the sort of comfort that we have on sourcing. Earlier, we had indicated OMC can go to -- from 3 to 6. Where are we on that? And if possible, if you could quantify something on the pricing for OMC imports and Sijimali whenever it comes?
So -- Ritesh, Anup this side. So, Ritesh, first on the alumina, okay? So as I said, that we will be probably a 5 million run rate refinery as we end quarter 1, beginning of quarter 2, okay? Now what you rightly said is around the bauxite, bauxite also, I'll reiterate that Sijimali will be started in, say, Q1. So we plan to get, whatever, 4 million, 5 million or 3 million to 4 million next year from there.
You know that the peak capacity there is around 9 million. OMC, if you would have picked it or not, they are already into the expansion mode. 3 million to 4.2 million, they are already doing expansion. And from there, they'll go to 6 million tonnes. So between these 2, we believe mostly, say, 85%, 90%, it should cater to our next year requirements. We also have some other domestic as well as some small tie-ups with Guinea, which should cater the balance.
And coming to your recent -- what we have recently picked up in Guinea. So we are in touch with Guinea, with our long-term supplier. We believe that it's a routine custom matter, nothing to worry. In any case, we have a very small contract, say, around 10%, 15% of our requirement. And they should be able to supply us.
And, Ritesh, on a bigger picture since everyone was talking about the alumina, let me reiterate, okay, little bit on the aluminum picture. Now coming to the volume, we've said that we will start commissioning BALCO end of this quarter. Probably by middle of the next year, we should be around 3, 3.1 million tonnes with some bottlenecking done.
The near term, as I said, the cost opportunity lies in alumina ramp up at Lanjigarh. The power only from the assets and the efficiency part of it, the materialization and whatever our operation excellence we bring into. With that, we believe the LME where it is, NEP, you have seen that quarter-on-quarter, we are growing in high teens. And we believe that with the increased RAP and the domestic sale, we should be doing closer to $300, $320 in Q1. If you will do the math, at 2,600 LME, 300, 320 of NEP, cost $870, $1,800, we should be at $1,200 and multiplied by 3.1 billion or 4 billion business, maybe in the quarter 2.
That's encouraging. Goel sir, any hedge positions that we have across businesses right now? if you could quantify volume value, that will be great.
Sure. So let me just cover 2 large businesses. Now starting with the zinc business, Zinc India, the hedge quantity in the current year is about 150 kt and that covers almost our 18% -- 1-8 percent of the volumes for the full fiscal. Out of 150 kt, 50 kt has already unwound in the first half. And as of September end, about 100 kt remans outstanding. That's one. So 150 kt is the hedge for the full fiscal, 50 kt has unwound, 100 kt remains outstanding. The hedge value is about $3,000 per tonne in case of zinc.
Now coming to aluminum. The hedge quantity is about 190 Kt, and that is about 8% volume on a yearly basis. The hedge price is about $2,550 versus give or take $2,600 per tonne. Out of 190 kt, about 125 kt remains outstanding as of September ending. So 18% zinc has been hedged in summary at about $3,000 per tonne, and about 8% aluminum has been hedged at about $2,600 per tonne.
This is very useful. Possible, can I squeeze one question?
Yes. Sure.
Sir, as a last question, Goel sir, how are you looking at the capital structure for both Vedanta and Hindustan Zinc? I'm asking this question in conjunction with the reducing promoter holding at both Vedanta as well as Hindustan Zinc. The reason I asked is, I think the deleveraging at VRL has progressed at a pretty good pace. And still, we are seeing some, basically, offloading from of promoters for both the entities. So it gives a bit of a conflicting signal. So how should one look at that particular variable?
So I will say it in the -- at least, it's a bifocal, Ritesh, at 2 dimensions. Firstly, in terms of structuring, holding of VRL as in promoters into Vedanta Limited. And we believe as a group with the current holding of 56.4%, we are quite comfortable. I don't think there is an intention right now to dilute more or acquire more. So the current state should continue. One should also look at the current holding in the context of a demerger. And as we all believe, there is a preponderance of opinion, where everybody believes post demerger, the value of the sums will be the part, will be more than the sum. And hence, maybe stake valuation post demerger, perhaps will be more beneficial. So we foresee the holding of VRL into VEDL or the VEDL into Zinc in near future will not materially alter.
Secondly, on the debt side, again, I'd like to also comment, at Vedanta Resources, our intent is to go down to $3 billion over 3 years starting the current fiscal. So from current $5.8 billion at the year beginning, we'll go down to $3 billion by end of 2027.
At Vedanta Limited, since it's an operating company, it will not be appropriate to ascribe an absolute value in the growth environment. And hence, one should look at net debt to EBITDA at Vedanta Limited. Right now at 1.49x, it is set to go down to less than 1x, where EBITDA at Vedanta will be more than the debt.
So in summary, the holding structure will remain more or less same in near future, demerger being the context. Debt viewpoint, VRL will be less than $3 billion debt. At Vedanta Limited, net debt-to-EBITDA will be less than 1x.
We'll take our next question from the line of Indrajit Agarwal from CLSA.
Congratulations on a good set of numbers in a challenging quarter. Most of my questions are answered. I have 2 questions. One, on the reversal that we had on Oil & Gas business, is there any tax incidence on it? Or is it just a book entry? Is there any cash tax impact of this?
So we have to -- of course, once we reverse our provision, Indrajit, we also create a deferred DTA on that. So it's only a book entry. There is no cash tax implications.
Sure, sir. That's helpful. And second is on your notes to account #6 on the AvanStrate business where you have bought out the holding of one of the -- of Hoya. So what was the outgo because of this? And you mentioned about you want to reorganize the capital structure. So what could be the payout on this? What is the intent and CapEx that we can have here?
Yes, sure. So you're right, AvanStrate used to be almost 51% holding until the remainder stake by our JV partner, Hoya, we bought sometime in the current fiscal. With holding stake buyback, our holding at AvanStrate, ASI, is almost cent percent, is about 99%. The total payout is about $88 million, out of which $66 million has been paid by sale of materials at ASI, AvanStrate. So ASI was holding some metals, which have been locally sold and paid to Hoya out of $88 million. Balance $22 million is paid by ASI's holding company CIHL. So cash, $22 million, $66 million is through metal sale.
Sure. And you talk about next strengthening the capital structure. So if you can lay out some plans in the next 2, 3 years, what kind of CapEx we can see over there?
I believe, Indrajit, the glass business will be a wonderful business. And right now, there are 4 large players globally. And Vedanta post the entire sale acquisition, they want to recapitalize the business, rebuild the furnace more so in our Taiwanese operation. And at that more actions you will see in the current quarter. From incremental profit viewpoint, this business has great potential.
Secondly, as you have seen, in terms of our domestic application with the government on display side, so between ASI, AvanStrate, and VEDL, the glass business will have great synergies in the future.
We'll take our next question from the line of Raashi Chopra from Citigroup.
Just -- I just wanted to reconfirm some of the numbers that you gave active debt, for the debt at the parent level. Now the $220 million of debt and $220 million of interest payment is due for the remaining FY '25. In FY '26, you said that the loan amount due was $820 million and $1.1 billion in FY '27. Is that correct?
That's correct. So current year second half, Raashi, the principal is $220 million, interest almost $200 million, a total requirement about $400 million. FY '26, next year, the principal loan is $820 million, and interest will be $550 million, so about $1.3 billion. And FY '27, about $1.1 billion, principal. And I will urge that let us not look at right now FY '27. For Vedanta Resources, multiple refinancing of bond has taken place in the previous quarter, and more will come, so the entire debt wall at Vedanta Resources will be far more decluttered in near future. But as of now, number is $1.1 billion in FY '27.
Okay. That's right. And essentially, you said that the -- in the repayment that you have, that the $4.8 billion has broken up; $3 billion is bonds, which you will refinance, $1 billion is bank loans, which will be a mix of refinance and repayment and $850 million is the private facility. So out of that INR 850 million, that is due in April '25. Is that correct?
So out of the $850 million, $400 million is due in April. And that also is a link with the brand fee that is anyways due in April. So out of $850 million, $400 million gets paid in April. And thereafter, this loan also has make-whole clause, lock-in, which we set in -- sometime in August next year. So we intend -- and this is a high-cost debt, Raashi, so we intend to repay this once make-whole gets over sometime in August next year.
Got it. And just for [indiscernible] FY '27, in FY '26, the $820 million plus the $550 million, what is the funding breakup for this -- planned funding breakup? In a sense, how much is from brand fee, how much is dividends, et cetera?
It's a tad early I would say, but if you look at brand fee, what we paid in the current year, FY '25, it is almost $400 million. Now, with the higher volumes, and hopefully, the better pricing, $400 million can become $450 million or thereabouts. So almost half will be net to brand fee and the remainder will be dividends. So as I mentioned, going forward, brand fee should be equal to the interest cost at Vedanta Resources. And with the flattened maturities, a routine dividend, whereby the receipt at VRL, give or take, $70 million, should take care of principles. So it will be a mix of brand fee and a normalized dividend next year.
Got it. And at the India level, your repayment due for the remaining part of FY '25 is how much [indiscernible] India?
If I just speak of Vedanta Limited stand-alone, so it is about INR 2,700 crores in current quarter and about INR 5,800 crores in the fourth quarter, so total about INR 8,000 crores, $1 billion, in the second half. Now, as you know, at Vedanta Limited, almost entire debt is secured. And with our current operating free cash flows, repayment and refinancing, knowing it is secure, is an option. So VEDL debt in terms of debt maturity servicing is far different than Vedanta Resources.
All right. And just lastly, on alumina, I just wanted to check that, when you go to a run rate of about 3 million for alumina, that would be -- that would make you captive at about 60%, 65%. So for the remaining 35% or so, how much is spot? And you said you don't have much spot purchase. So between spot and long term, what is the split very roughly?
60:40, 60 would be long term.
Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to Ms. Prerna Halwasiya for closing comments. Over to you.
Thank you, Yashaswi. I would like to thank you all for taking time to join this call today. I hope we were able to answer most of your questions. In case you have any further questions, please feel free to reach out to us. This concludes today's call. Thank you, everyone.
Thank you.
On behalf of Vedanta Group, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.