Vedanta Ltd

NSE:VEDL

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Vedanta Limited 4Q FY '23 and Full Year Earnings Conference Call. [Operator Instructions]

Please note that this conference is being recorded. 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, ma'am.

[Prerna Halwasiya, executive]

Thank you, Faizan. Good evening, everyone, and welcome to our fourth quarter of the financial year '23 earnings call. I'm Prerna Halwasiya. On behalf of the entire team of Vedanta Limited, I would like to thank you all for joining us today to discuss our financial results and business performance.

The transcript and audio of this call will be made available on our website. The financial statements, press release and the presentation are already published on the website. Today from our leadership team, we have with us Mr. Sunil Duggal, our Group CEO; Mr. Ajay Agarwal, Acting CFO. We also have a few leaders from a couple of our key businesses, Mr. Arun Mishra, CEO of Zinc Business; and Mr. Rahul Sharma, Deputy CEO, Aluminum Business.

Please note that today's entire discussion will be covered by the cautionary statement on Slide #2 of the presentation. We will start with the update on our operational and financial performance, and then we'll open the floor for the Q&A. Now I would like to hand over the call to Mr. Duggal.

[Sunil Duggal, executive]

Thank you, Prerna. Good evening, everyone, and thank you for joining our call today. Amidst rising interest rate, the Indian economy thrived in FY '23, powered by strong macroeconomic fundamentals and domestic consumptions. Nevertheless, the global economic climate presented macroeconomic hurdles that led to a moderation in commodity prices. Despite this challenging scenario, our team implemented strategies to ensure consistent operational performance and stringent cost control, optimizing working capital and ultimately resulting in impressive financial performance.

FY '23 was a year of remarkable progress on ESG front, led by our transforming for good purpose. We received validation for our progress on ESG from top rating agencies like MSCI, DJSI, Sustainalytics, and CDP, which confirms that we are moving in the right direction. We finalized 1826 megawatt of RE power agreement and turned 4 of our businesses water positive. We are working on our aim of transforming the planet. Through our CSR initiatives, we were able to positively impact the lives our 44 million people.

Our dedication and efforts towards CSR have allowed us to make a significant difference in the communities in which we operate, empowering individuals and contributing to the betterment of society. We believe in creating a brighter future by empowering the most marginalized communities. Our initiative Project Panchhi is a testament of this philosophy by educating and enabling 1,000 girls from underprivileged rural communities, we aim to build the gap of general inequality and provide them with equal opportunities for growth and success. Our vision goes beyond just diversity as we strive to create a more inclusive workplace, that reflects the rich and vibrant diversity of our society.

Vedanta was honored with the highly acclaimed Kincentric Best Employer India Award distinguishing us as the sole manufacturing conglomerate in India to receive this esteemed recognition. Our people are the greatest assets and our strong operational performance is a testament to the same. We delivered highest ever annual production at aluminum, Hindustan Zinc, Zinc International and Electrosteel. Commercial production started at Nicomet, India's only nickel-cobalt operations. Production also commenced from Liberia mines, expanding our iron ore capacity and global footprint. New 60 KTPA Furnace at FACOR was commissioned, taking total capacity to 140 KPTA.

We operationalized Chhotia mines and started Jamkhani coal mines. We further added Ghogarpalli and Barra blocks to our coal portfolio. Ghogarpalli has massive 1.2 billion tons of reserves and Barra is an unexplored block with 900 million tons of estimated resources. These mines together would make our expanded operation more than 100% secured per coal.

We were also declared successful bidders for Sijimali bauxite mine with 311 million ton reserves, is a steady fit for our size, location and bauxite quality and is key to strengthening our raw material security. We fully ramped up Barbil ore mines in Orissa and were declared successful bidders for Bichlolim mine in Goa, augmenting our resource base.

In line with our steadfast focus on augmenting capacity and vertical integration, we spent around INR 10,000 crores on capital projects this year. Our financial delivery has been equally noteworthy with all-time high annual revenue of INR 145,404 crores and second highest-ever annual EBITDA of INR 35,241 crores. We delivered historic high shareholder return with an interim dividend of INR 101.5 per share, and we had a record contribution to the exchequer of nearly INR 74,000 crores. During this year, we made considerable progress on various strategic levers, received Supreme Court permission for care and maintenance of Tuticorin copper smelter. The matter is now listed for final hearing in August.

Signed 10-year production sharing contract extension with Government of India for Rajasthan block. Trade barriers were lifted in Karnataka, marketing freedom for oil and gas was given.

Now if I move to our operations, first coming to aluminum. Aluminum is progressing well on capital projects focused on making our businesses Fully integrated with 100% captive alumina from high MTPA Lanjigarh refinery and enhanced coal security from captive mines. At Zinc India, we crossed 1 million tonne milestone metal production. We aim to continue this positive momentum to reach 1.2 million tonnes. Zinc International is well positioned for long-term value creation. Gamsberg produced the highest ever MIC of 208 KT's and project work on the next phase is in full swing to take the product capacity to 500 KTPA.

In oil and gas, the focus this year is going to be on augmented results and the process through both development projects and exploration. We will undertake high-impact exploration program of 10 wells, seismic and studies across various basins in Northeast, Cambay, Rajasthan and Offshore, targeting addition of 55 million-barrel equivalent resources. Iron ore significantly increased its mining portfolio FY '23. Total iron production in FY '24 will be more than 15 million tonnes from Karnataka. Western Cluster, Liberia, Barbil, Orissa and Bichlolim mine in Goa put together. Electrosteel increased hot metal capacity to 1.7 million tonnes and would expand to 3 million tonnes by early FY '25. Operation has now fully integrated with Barbil mines to meet ore requirement. FACOR is further planning to add 300 KTPA capacity for ferrochrome production by FY '25 to take the total to 450 KTPA in 2 years.

To summarize, We made good progress on our strategic priorities in FY '23 and are eager to build on this momentum in the current year. We remain optimistic about the commodities, markets and are confident of our ability to navigate the ever-evolving business environment. We look forward to work together with all the stakeholders and larger communities and hang them up [indiscernible] and support.

Before we move ahead, I want to take this opportunity to thank Mr. Ajay Goel, our former Acting Group CFO for his unwavering dedication and incredible contribution during his association with Vedanta. I wish him the very best for future endeavors. I am pleased to announce that Sonal Srivastava will be joining us as Group CFO very soon. She has extensive experience working with global organizations and large Indian corporates. In her previous role, she was CFO for Asia Pacific at Holcim. Her expertise in financial services and manufacturing sectors may add an invaluable addition to our leadership team. To take you through financial performance today, I have with me Ajay Agarwal, who is the Interim, he is acting as Group CFO. Over to you, Ajay.

[Ajay Agarwal, executive]

Thank you, Mr. Duggal, and very good evening to all. I'm here to really talk about the quarter 4 FY '22, '23 financial performances. We witnessed the global economy to recover from the lackluster 2022, with a positive bias for economic growth, despite the global crisis, India's resilient economy, we believe has shown better performance than the rest of the world, particularly in the manufacturing sector. The RBI expects the India GDP to grow at the rate of 6.5% in financial year '22, '23, '24, which is certainly reassuring. And we also anticipate that the global commodity demand to perform better than expected due to improving global economic outlook, boosted by a revival of Chinese economy, improvement in real estate market, automobile sector and coupled with the fact that the European economy recovery is also quite strong from the impact of inflation.

Speaking of financial year '22, '23, despite the macroeconomic challenges, we have delivered our all-time high full year revenue of INR 145,404 crores. We delivered second highest EBITDA of INR 35,241 crores, the fiscal year '22, '23, which helped us to generate record free cash flow pre-group CapEx of INR 28,068 crores.

All this is nothing but our enduring -- demonstrate our financial success that our underlying fundamentals of business remains robust, and we have once again achieved a year of consistent, dependable and operational performance across our businesses. Furthermore, this allows us to make a substantial contribution to the sector, which stood at close to about INR 74,000-odd crores during the financial year ended '23.

We also returned a record INR 101.5 per share to our shareholders during the fiscal year '22, '23. Our continuous focus on operational excellence and cost control measures have enabled us to minimize the impact of inflation, which we witnessed during fiscal year '22, '23 on our cost structure and also help us to generate robust cash flows. Combination of these enabled us to deliver another impressive quarter performance and some of the key financial highlights for the quarter ended 31st March '23. Our consolidated revenue stands at INR 37,225 crores on a quarter-on-quarter basis, which is up by 10%. And largely, it is driven due to higher sales volume and improved LME.

We also delivered an EBITDA of INR 9,362 crores, which is 32% higher than quarter-on-quarter with a strong margin of 29%, supported by easing of input commodity inflation, volume growth and various cost-saving initiatives undertook during the fiscal -- during the last quarter. Our profit after tax stood at INR 3,132 crores, which increased marginally quarter-on-quarter. And we continue to maintain a strong double-digit return on capital employed to the tune of 21% throughout the year.

We have an income statement in the appendix, which is Page #27, where you will find details against each head of the profit and loss account. If we move to the EBITDA bridge slide, Slide #21. When comparing the EBITDA performance quarter-on-quarter, the largest driver was the lowest input commodity cost and improved LME. Beyond these external factors, we are pleased that we have delivered higher volumes through improve operational efficiency, further supported by initiatives on cost and marketing efforts. Our key businesses, mainly zinc and aluminum achieved record operational performances and lower cost of production. Besides business performances as a result of several improvement initiatives undertaken across various businesses, which the group has. On a full year basis, our EBITDA was down due to lower LME and higher input commodity cost, which was partly offset through increased volume, strategic hedging initiatives and ForEx gain.

Moving to Slide #22 on net debt bridge. During Q4 FY '23, our net debt as of 31st March stands at INR 45,260 crores. In the quarter, our business demonstrated the robustness of our performance by generating a healthy operational free cash flow, free gross CapEx of approximately INR 7,211 crores, which is 11% higher quarter-on-quarter. The net debt increased overall due to the allocation of funds towards capital expenditure and a significant amount of shareholders' return, which is all-time high for the group.

Moving on to the balance sheet now. Page #23. We remain committed to our capital allocation framework, which encompasses robust balance sheet, a healthy payout ratio with solid dividend yield and flexibility for investing in discretionary capital options, including organic and inorganic opportunities as well as providing additional shareholders return.

Our net debt-to-EBITDA stands at 1.3x and is maintained at a comfortable level. We ended the quarter with INR 20,922 crores. On healthy cash and cash equivalents. Our average debt maturity continues to be maintained at 3.5 years with average cost of borrowing at 7.8%. I also would like to mention that our holdco has also made considerable progress towards its commitment to reduce debt by 4 billion over the course of 3 years.

They have already delivered by 3 billion till date, out of which 2 billion was achieved during the fiscal year '22, '23 itself. With our strong and flexible balance sheet, we are well positioned to continue disciplined investments in our pipeline for various value-added growth.

In fiscal year '23, we invested approximately 1.2 billion in gross-oriented capital expenditures, which brought several projects close to completion. As a result, we are now committing to allocate 1.7 billion towards gross CapEx in the current fiscal year. We have maintained our commitment of providing our stakeholders with strong and consistent performance and attractive return even in the face of volatile macro environment. Despite the challenges, we have demonstrated resilience throughout the year. The progress we made in the past year is quite noteworthy, and I have full confidence in our ability to execute our business strategy effectively as well as the finance strategy effectively, which will position us to create value not only now, but also in the foreseeable future.

I'll hand it over to now to Prerna.

[Sunil Duggal, executive]

Operator?

[Operator]

[Operator Instructions] The first question is from the line of Amit Dixit from ICICI Securities. Mr. Dixit, the audio is not clear from the line, please use the handset.

[Amit Dixit, analyst]

Is it better?

[Operator]

Yes, sir.

[Amit Dixit, analyst]

Congratulations on a good set of numbers and very healthy dividend during this year. So I have 2 questions. The first one is pertaining to Oil and Gas division. Now if you look at the production, it has been declining secularly and the guidance that we have for FY '24, I know we're targeting augmenting reserves and resources. But still the guidance is quite low at 135, now in our annual report and Investment Day, we had highlighted that we will reach a much higher production level by FY '25. So are you shifting that particular production label to, I mean, further or is it that, that particular label is still intact?

[Ajay Agarwal, executive]

Yes. So I will go for this question. So we have given a guidance of 135 to 140 kboepd. This time, we are a bit mindful of giving the guidance because we want to give the guidance and we want to beat the guidance, unlike earlier year. So the issues which we are trying to address and the initiatives which are in the pipeline is to manage the decline, number one. Number two, there are 2, 3 high-profile projects, which are in the pipeline. We are in the process of materializing that. One is the enhanced oil recovery. So the government is coming up with a policy on the enhanced oil recovery, and we are in discussion with the government that our license is valid up to 2030. And the results and the outcome from the existing results can go beyond 2030. So the government coming up with the new policy of the enhanced incentives and also considering if the contract could be extended beyond 2030. So this is one initiative.

The other 2, 3 initiative RFP, the exploration wells around our operations, especially in the offshore where we feel that the result would come. And you probably must have noticed that we have a new CEO in the name of Nick Walker, who has a very rich global experience. So he's in the process of evaluating the various opportunities.

But apart from that, he has identified 10 high-impact wells across offshore Northeast area basin and he particularly believes that the potential in Northeast on the border of Assam and Nagaland is very high, where some disputed area was that the Government of India has resolved this issue. And we want to start the seismic and the drilling at this operation as soon as possible. He believes that the potential of this area could be as big as it was in the Western block. So this is what we feel we are doing in oil and gas. But our belief is very firm and his belief is very firm that we will get some good discovery from the exploration wells and a couple of projects which I named when we will put the project -- this project in the pipeline, it will give us the step jump. If not in the current year, where we want to beat our guidance, but in the next 2 years, it will give us the step jump from where we are.

[Amit Dixit, analyst]

Sir, just a follow-up on this. So what would be your guidance, let us say, in FY '25? I mean...

[Ajay Agarwal, executive]

Before evaluating that, I don't want to put my words into the mixed mouth, really evaluating that probably in the next quarter call, we will -- we may be able to give you a better guidance of what he believes could be the potential in the year FY '25 and FY '26, depending on how many project he is able to conceptualize. And of course, as the year progresses, the 10 high-potential exploration wells, these give some results then the visibility could be even better. And then we can report that what could be the full potential, which we can explore in the year FY '25 and FY '26.

[Amit Dixit, analyst]

Sir, the second question is on ferrochrome. We are targeting 450 KTPA of capacity. This is a very huge capacity. I mean I don't think at South Africa, anybody has this kind of capacity in the world. So first of all, where we are getting chromium for it from and ferrochrome being a very high, very power-intensive business, won't it impact your ESG aspiration? What market are we targeting for this? Is it export or domestic, what could be the mix of this particular uptake?

[Ajay Agarwal, executive]

I think you have asked 4, 5 questions in 1 question. I'll try to answer all those questions. As far as this business the capacity was 75 KTPA and there was 1 unfinished furnace, which we are since commissioned, this was 60 KTPA furnace. So now the overall capacity with the border necking and the commissioning of new furnace is taken to 140 KTPA. This is up and running. There are 2 mines [indiscernible]. We are taking the EC for this mine to raise the EC capacity from 50 KTPA to 150 KTPA. There is another mine [indiscernible] mine.

This mine has been running as an open pit mine. We want to take it underground. And no better experience than the Ramapura and Hindustan Zinc to transition from open pit to the underground mine. So there is a rich resource lying at depth under this open pit. So we want to develop this open pit. We are about to start the total and take the Board approval.

And this -- in the first phase, we want to take this mine to 1.5 million tonnes. And in the second phase, we want to take this mine to 2.5 million tonnes. In the first phase, we will add a furnace of 150 KPTA taking the total capacity to say around 300 KPTA. And then the second phase, another furnace we want to install 150 KTPA taking the total capacity to 450 KTPA. So as far as carbon footprint is concerned, I mean we have to go hand in hand in parallel to evaluate the possibility of decarbonizing our assets. And you must have seen the aggressive way we have gone. And today, the work is on to install 4 gigawatt of renewable power. And which will give 33% reduction of the carbon footprint from our promise of 25% by 2030.

And we want to put a plan in place by FY '25 to have a full visibility of 25% carbon footprint reduction by 2030. So we fully -- we are fully committed. We want to do it even before FY 2030, that is what the internal motivation is, and we are fully committed to fully decarbonize our operation by 2050.

[Operator]

The next question is from the line of Sumangal Nevatia from Kotak Securities.

[Sumangal Nevatia, analyst]

Just continuing on Amit's question, I mean, on the delays, I mean we've seen across businesses, there are delays in projects. Anything in business, for example, the 1 million tonne expansion earlier, we're guiding 1Q '24, now we've moved to 1Q '25 million. And also we are seeing the same in coal mines and Electrosteel as well. So just, sir, if you could just highlight, I mean, over the next 2, 3 years, the key projects and what are the reasons for these execution delays that we are facing.

[Ajay Agarwal, executive]

So I would say there are not delays as such in the execution of the project. I mean, the so many factors which also play EBITDA be part is that we -- some of the technology and the equipments also come from China, a bit of the delay happened. That's what broadly, all our projects are on schedule. The one of the high-profile project where the maximum returns we expect and where we integrate -- want to integrate our operations is Aluminum business, where we are commissioning the train 1 and train to both this year and operationalization of the coal mines. I would say, we may have a record in the country where in such a short span of time, we have been able to operationalize Jamkhani mine, and it is up and producing today the license capacity of 2.6 million tonnes.

Now we have taken the approval to raise the capacity to 3.9 million tonnes. In the current year, we will make a full production of 3.9 million tonnes. One of the other mines, Kurloi mine, we want to operationalize this year itself. So operationalizing the mines after winning it through auction in a period of 1 to 2 years, I don't think there are many people who are able to do it. Even next year, we want to operationalize Radhikapur and Bichlolim mine.

So all these mine operationalizing, it will provide more than 100% security. And same way we want to go for Sijimali mines, which we have gone through auction for bauxite. And because this will provide a full bauxite security to us, the R&R is such that when the mine could be fully ramped up with more than 300 million tonnes of reserve and resource, this mine has a potential to produce 12 million to 15 million tonnes of bauxite, which will provide a full security to us, and we want to go this way and integrate our operation. And the value-added product is a very important area where we want -- we are commissioning the old product, which is the highest demand growth market in India, and the premiums are very, very high.

Similarly, in the Billet capacity, PFA capacity, so we want to make our Aluminum operation 100% value-added products. So similarly, there are projects going on in the other businesses like Electrosteel, Zinc International, so -- Oil and Gas. So where we feel that broadly, we are on track to complete our project in time.

[Sumangal Nevatia, analyst]

Sir, just to, I mean, repeat and get some specifics sir, BALCO 1 million tonne expansion, it's almost 1 year delay from what we said last year. So can you share some detail as to what is the status? And what is causing the delay? And the same with Electrosteel 1.5 million to 3 million tonne expansion, similar 1 year, 1.5 year delay. So just some specifics on these 2 projects.

[Ajay Agarwal, executive]

I mean we -- as I said, that the equipment movement from China caused a bit of the delay. But more or less, these projects are in full swing now. And whatever commitment now we have given, we'll be able to complete the project on those time lines.

[Sumangal Nevatia, analyst]

Okay. Got it. My second question is with respect to our capital structure, and also pledging, I mean we've seen that. I mean we read in the news that we are to -- we are pledging Hindustan Zinc shares for incremental loan despite having such a strong balance sheet. And I just want to understand, I mean, what are the reasons? Is it because of higher dividends that are we raising these loans? Or because I mean, the leverage the lenders are not comfortable lending to us without these pledges? And also in the medium term, what should we expect the capital structure of Hindustan Zinc be? I mean, in terms of debt and payouts. .

[Sunil Duggal, executive]

Well, from a capital structure of Hindustan Zinc perspective, maybe when you have this Hindustan Zinc, both meeting and the investors call, probably that may be the light floor for you to ask this question. Speaking from the Vedanta standpoint, pledging Hindustan Zinc shares and raising funds, these are -- in our view, these are natural course of business. This is a usual rule studies -- a usual way of sourcing and raising debt. We don't find that to be an extraordinary event, which will require a significant different response to this question.

[Operator]

The next question is from the line of Indrajit Agarwal from CLSA.

[Indrajit Agarwal, analyst]

I have 2 questions. My first question is, can you help us understand how much is the repayment due at the parent VRL till June and for the next 12 months?

[Ajay Agarwal, executive]

Well, the -- till June, the payment due is about $750-odd million. I may be -- the numbers might also be incorrect, but we're about $750-odd million. And for the year, the balanced fiscal year, the amount could be around $2 billion, includes the 750-odd-million. So what's the next part of the question, Indrajit?

[Indrajit Agarwal, analyst]

My next part, actually, a follow-up to that is, what is the kind of sourcing we are looking for until June for the $750 million?

[Ajay Agarwal, executive]

What I can assure you is that the group has always met its commitment on time and group is working towards it to meet its commitment on that before. So whatever the time lines are, like you said, for the June month or the June quarter, they are working towards this to meet this commitment. And likewise, it will be done for the year-end as well.

[Indrajit Agarwal, analyst]

Sure. And what is the status on the GR2 RE conversion? Where is it stock? And what is the kind of time line you should look at?

[Ajay Agarwal, executive]

So we are reaching out to all the lenders to seek their NOC. As you know, this process requires the NOC from the lenders. And the work is ongoing as we speak. The scheme does not envisage any outflow of cash. And hence, there will not be an impact on the creators of the company, so as and when we get the NOC from the lenders, it should happen.

[Indrajit Agarwal, analyst]

So getting this NOC, is it more procedural? Or is there any kind of pushback or any questions by the lenders that we need to address before we get the NOC?

[Ajay Agarwal, executive]

So we are reaching out to the lender. And like I said, as we speak, we are talking to them. We want to understand if there are any concerns. In our view, it is a process, it does not envisage any challenges. So as and when we get the NOC from the lenders, this will be done.

[Indrajit Agarwal, analyst]

Any time line for that, that you can give at this point?

[Ajay Agarwal, executive]

At this moment, it's difficult to give any time lines. But what I can assure you is that the conversations are on, discussions are on with most of them, and we are hoping that this should get solved.

[Operator]

[Operator Instructions] The next question is from the line of Alok Deora from Motilal Oswal.

[Alok Deora, analyst]

Just firstly, if you could just explain in your comments, I briefly heard about you mentioning about some slowdown in China and Europe. So just if you could indicate what exactly or how are you seeing the demand situation there? And what out because we are getting mixed statements in some of these geographies on the demand side?

[Sunil Duggal, executive]

Yes, I didn't say more slowdown in China and Europe. That was more to delay in the equipment delivery, some of the equipment, I believe from China. So that's what it is. As far as you see the slowdown in China and Europe is concerned and the commodities and the metals we deal, we feel that the metals we deal, there is upsurge in demand in India, which gives us the opportunity to serve this upsurging the demand. But these metals we deal have to play a very pivotal and a critical role in decarbonization. So the resources today and globally are such that it will be not easy to meet the growth in the demand in this sector. So we feel that the -- this sector will always remain as a sunrise sector and the commodity prices always are going to stay at elevated level for the metal we deal with. So we are very bullish. We are very confident that we have to play a very critical role to meet the demand of these metals, both in India and globally.

[Alok Deora, analyst]

Sure. Just one last question. So is the purchase by Hindustan Zinc of the zinc asset or what's the status on that? Because -- so what we understand is that there are time lines for share of the approval is lapsed, so any update on that? Because what is the status of this 2.9 billion [indiscernible].

[Ajay Agarwal, executive]

There is no update as such to be reported at this point of time. I mean we still believe that it is value-accretive to both Hindustan Zinc and Zinc International because the 2 operations will definitely complement each other because Zinc International has very rich reserves and resources, which is even more than Hindustan Zinc. The way the Hindustan Zinc has grown from where it was to what it is today. Zinc International, of course, has also grown, but still with huge potential. So what Zinc International possesses and the geography it is located and the skill it has and the management stride, which Hindustan Zinc has, we feel that these 2 businesses coming together can create a wonder. And this is what we have been communicating to all our stakeholders.

[Alok Deora, analyst]

Sure. No, I understand. So the reason I was saying is because they report that -- so Zinc -- Hindustan Zinc had around 3 months to call for the EGM for this and that 2, 3 months last kind of last week. So that's why I was just checking on the data critically.

[Ajay Agarwal, executive]

No, we will remain in active discussion with the stakeholders to find out what possibility in what manner could be noncash deal, what could be the other ways where this alignment could be possible and we still feel that this is a very, very value accretive opportunity for both the businesses.

[Operator]

Next question is from the line of Ritesh Shah from Investec Capital.

[Ritesh Shah, analyst]

Sir, I have 2 buckets of questions. First bucket has 4 questions in it. Before I start, I'd like to congratulate the team on debt reduction at VRL to $6.8 billion. Sir, so first question has more parts to it. First is, I think you had indicated $2.1 billion of repayment, which was there from Jan to June. In the earlier call, we had indicated we were looking at $550 million from PSU banks, $150 million from Barclays, $750 million from [indiscernible] $300 million from [indiscernible] and there was a balance small amount, which was left. So the question is, sir, how much -- how we tapped? And what's the status on that? That's the first question. Should I sir, complete like the bucket of questions, 4 questions.

[Ajay Agarwal, executive]

Yes, please go ahead.

[Ritesh Shah, analyst]

The second related part over here. Part B is, I think there was -- the rating agencies were talking about $1 billion of investment at Zinc International. So just wanted to know your thoughts whether it has happened, not happen. Is there some probability to the event, that's the second thing. Third is, if you could please clarify what is in set like an encumbrance number at both Vedanta and Hindustan Bank? And I do take a note that the promoter holding in Vedanta has reduced from 69.7% to 68.1%. So how should we read this that this is like an encumbrance? And last question for the first part is what is the retained earnings number on a marginal basis for Vedanta India?

[Sunil Duggal, executive]

Okay. So let me make an attempt to answer your questions. The rating agencies have quoted loan transaction at Zinc International. I think in the previous question, this question was somewhat answered. These are, again, a very, very specific transaction, and routine financing arrangement, which the group undertakes on a year-on-year basis. And as and when the transaction gets consummated, we will be able to respond to a very specific question of yours. Coming to the repayment.

Like I said, the group is extremely confident to meet its debt obligation, commitments and requirements on a timely basis. We have always met our commitments in the past, and I don't see any reason, any risk of not meeting the commitments in the future as well. So I may not have full details because it's investor call of Vedanta Limited are not necessarily VRL, but I'm sure that the team is working and they have full details in terms of making plans to make their arrangement, whatever the commitments are due from here on until March. Coming to the retained earnings numbers. As on 31st March 2023, we have INR 3,843 crores as our retail earning in the signed balance sheet. I hope, Ritesh, I have been able to answer all your questions.

[Ritesh Shah, analyst]

Sir, on the promoter stake, which has reduced and the [indiscernible] at Vedanta and Hindustan Bank, Duggal sir, how should we look at this?

[Sunil Duggal, executive]

Yes. So it's -- in our view, it's an independent transaction done by the promoter entity. And we are not in a place to really speculate the reduction and where the funds have been used by the promoter entity.

[Ritesh Shah, analyst]

All right -- and sir, on pledges.

[Ajay Agarwal, executive]

On pledge part of it, I believe from Hindustan Zinc's perspective, we have pledged 9.21% shares of Hindustan Zinc and the -- we have signed 50.1% as NDU. So these are the details with respect to Hindustan Zinc's place.

[Ritesh Shah, analyst]

And sir, for Vedanta?

[Ajay Agarwal, executive]

Vedanta, you mean to say, VR?

[Ritesh Shah, analyst]

Vedanta India, sir, what quantum of equity actually pledged are encumbered?

[Ajay Agarwal, executive]

50.1%. It's an NDU, like I said, Vedanta Limited has pledged 9.21% and signed and NDU of 50.1% of Hindustan Zinc.

[Ritesh Shah, analyst]

Okay. So let me rephrase it from the Vedanta resources into Vedanta that 70% stake, which was reduced to 68.1%. What is the status of that 68.1%? What part of it is pledged or encumbered?

[Ajay Agarwal, executive]

It's fully encumber, and it is kind of an NDU which we -- which I just explained to you from Hindustan Zinc point of view, it's a similar arrangement.

[Ritesh Shah, analyst]

Okay. Sir, sorry, if I'm just dragging a bit. But if the state is fully encumbered, then how is that, that the promoter is allowed to reduce the stake because a little bit of technicality, what I understand is it income the entity would not have the right to actually sell it?

[Ajay Agarwal, executive]

Well, I can't really speculate how they were able to sell. But I'm sure as you know that in the last years, they have reduced the debt also. I'm sure that some parts would have been on encumbered and would have allowed a free share to trade.

[Ritesh Shah, analyst]

Sure, sir. I just have 1 question for Duggal, sir, and probably I'll join back the queue. Sir, any update on the semiconductor foray, whether it is Vedanta level or VRA level? Any color over there?

[Ajay Agarwal, executive]

As of now, the semiconductor is not under the banner of Vedanta Limited. So it will not be possible for me to make any comment at this point in time.

[Operator]

Next question is from the line of Ashish Kejriwal from Nuvama Institutional Equities.

[Ashish Kejriwal, analyst]

Sir, my question is on aluminum business. Is it possible to share what kind of metalization of linkage coal happened this quarter? And how you are expecting your cost of aluminum to fall in next quarter.

[Ajay Agarwal, executive]

So I have with my colleague, Rahul Sharma on the call, but I'll give you a bigger perspective of the coal linkage. The coal linkage has improved because the coal position in India has leased out, and we must have also seen that the coal stocks in India, in IPPs, about 15 days compared to 6, 7 days last year at this point of time. So with this, the premiums are -- the auction premiums are down to be better. The coal production has gone up from Coal India. The last year, the production growth in Coal India was 12%. Captive mines, coal production went up by 25%.

Overall, the production grew in India by 15%. So the -- our demand is not rising at this speed. And because of the renewable capacity is also getting commission. The -- overall by the renewable -- the contribution of the renewables in the power -- making the power demand is also going up. So this is all easing out the stress on the coal availability in India. And with this, we feel that from now on, the position will ease more and more. And similarly, the rate availability from the value also is becoming better and better. But exactly on the Aluminum cost, Rahul, if you are there, kindly make your comments on how the cost is progressing and what are the levers on it going forward.

[Rahul Trivedi Sharma, executive]

Thanks for this, Agarwal. I think the important part is that if you see from coal which I will talk linkage and captive because now we have opened up the Jamkhani mine in last quarter, like club. And what I'm trying to make a point is that if we see that we were at 66% of linkage plus captive and metalization was 82%. The good news is that this year, we are starting with 80% of security and target remains more than 90% of metalization. So from a coal security and the metalization, I think we are in a much better position. That is point number one.

The second important point, which I'm very pleased to know that if you remember the last year when we started the year, our coal inventory was 4 to 5 days and before the monsoon. But this year, when we are starting the year, we have, in our plant close to 14 days of inventory and another 11 days at our captive mines. So totally, we are 20 to 25 days of inventory, which we are very comfortable before monsoon of the Q1. And coming to the point in terms of the cost from the Q1 point of view, I think that for a year, guidance has already been given in our presentation. But Q1, our target remains what we said last quarter was in Q4, we were absolutely there in around 4% reduction. And same where we are looking 5% to 6% reduction in Q1. So that's why from the cost side. I hope I have answered your question.

[Ashish Kejriwal, analyst]

Yes, that's very clear, sir. Second thing is because in earlier calls, we have indicated the estimated coal cost of different mines at peak capacity. Is it possible to share that? Like Jamkhani, Kuraloi, Radhikapur. I'm just trying to compare it from the existing costs where we can have going forward.

[Ajay Agarwal, executive]

I can only answer that. If you see that the coal bucket, as we -- as Mr. Duggal said initially, the coal mine, we have more than 100% of the capital requirement of the capacity there. And overall cost, we have estimated it will be less than INR 0.70. It can be between INR 0.65 to INR 0.70. That's what the projection for that. And we are absolutely on that point.

[Sunil Duggal, executive]

Which works out to say a total power cost of 400 to 450 per tonne.

[Ashish Kejriwal, analyst]

Sure, sure. And sir, secondly, have we done any further hedging in our -- any of the businesses?

[Ajay Agarwal, executive]

Not at this point in time.

[Operator]

Ladies and gentlemen, we will take the last question from the line of Rahul Jain from Systematix.

[Rahul Jain, analyst]

Sir, on the cost side, I think your guidance appears to be very conservative because given the coal price, which today was flat 70%, and we are using so much coal across our businesses, I think is more than 35 million tonne.

[Operator]

Your audio is slightly muffled from your line. Please use the handset.

[Rahul Jain, analyst]

One second. Yes. So you gave a rapid answer, but your guidance appears to be very muted in terms of the cost that we are seeing. if I'm not mistaken, [indiscernible] down 70% from its peak and we should see a much better delivery from Coal India. So are we conservative on our numbers on the Cohort on Hindustan Zinc as well as in the aluminum business? Because you have just given, I think, a $200 kind of a cost reduction whereas in the past, we have reached about $1,450 per million. So are we being very conservative on this?

[Ajay Agarwal, executive]

I think you would be right because we would like to definitely meet the guidance of what we have given in this call today. We have given a guidance of $1800 to $1,900 a tonne of hot metal. So I think if we are able to meet around $1,800 per tonne of cost in this year. So let us suppose even if the aluminum prices stay at between $2,300 to $2,400 so then cut off, say, $2,600 and the cost scales at $1,800. So it will give us a very good EBITDA margin of say around $600, $700, which is good for the business. But we wish to -- and we aspire to meet the target. So -- but the overall objective of the business of having an EBITDA margin of $600 per ton is met at this cost even at the medium prices are, say, average of $2,350 to $2,400.

[Rahul Jain, analyst]

Right, right. And sir, also, we stepped up at the CapEx guidance across all the businesses. I think it is the highest CapEx that we're going to do in the last 5 years. So in terms of sales, there is some commodity price branch or there is some weakness in price which persist. So which are the key priority, so we are the ones which we are going to pursue no matter what, I mean, which are the top projects that you're looking at in the next 2 years?

[Ajay Agarwal, executive]

So basically, all these projects are very, very important. The major CapEx spending of $0.7 billion is in aluminum. This is on the vertical integration, adding the value-added part at operationalization of mines. And these CapEx are going to make us smarter and smarter. So every CapEx commission is going to add dollars to the bottom line. So these CapExes are very, very important as far as the aluminum business is concerned. Similarly, the other CapEx is if there are the opportunity to reporting the low-hanging fruit, to take the full capacity to 1.2 million tonnes. We are very excited about this CapEx. Similarly, in Electrosteel, it is unfinished project. We want to complete this project as soon as possible.

Similarly, in Zinc International, the way the zinc businesses and the way the projection of the zinc commodity prices are there for the future, we want to complete this product as soon as possible. So all these products are very, very value accretive to us. And we are very excited, and we want to finish these projects as soon as possible because all these projects are going to increase our revenues, cut down the cost and make our position much more fundamentally more stronger. So we are very excited. And these are the products where -- these are all brownfield expansions.

[Rahul Jain, analyst]

Right, right. Sir, that was a very elaborate answer. So just a related one. So should we expect the dividend payouts to kind of, we have been very generous in the dividend in the last 1 or 2 years. So we expect now to be more moderate in mine earnings? Or how should we see the dividend in the next coming years?

[Ajay Agarwal, executive]

Rahul, I think you know I answered this question. We can also ask the same question. So dividend is a Board matter, and I'm sure Board will consider all parameters really ensuring that the shareholders are awarded.

[Rahul Jain, analyst]

No, it was just alluded because our CapEx is going up significantly. So obviously, cash allocation should be different. So that is coming more from that side.

[Operator]

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Ms. Prerna Halwasiya for closing comments.

[Prerna Halwasiya, executive]

Thank you, Faizan. And thank you also taking the time to join us. I hope we were able to answer most of your questions. In case you have any further questions, please feel free to reach me or my colleagues at the IR Team. This concludes today's call. We look forward to reconnecting with you for our next quarter earnings call. Thank you, everyone. Have a good day.

[Operator]

Ladies and gentlemen, on behalf of Vedanta Limited, that concludes today's conference. Thank you for joining us, and you may now disconnect your lines.