Vedanta LtdQ4 FY24Diversified Metals

Vedanta Ltd

Q4 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Aluminum demand is expected to grow at a CAGR of 4%-5% globally from a primary demand of 70 million tons in CY'22.
→India showed strong aluminum demand growth of 17% YoY in the past nine months, with demand rising from 3.9 million tons last year to an expected 4.5 million tons this year.
→Expansion plans for aluminum capacity in India include increasing from 2.3 MTPA to 2.8 MTPA, and eventually up to 3 MTPA.
→Zinc India and Zinc International operations are steady; Zinc India achieved best-ever production in nine months.
→Coal production and linkage improvements will help drive cost reductions and operational efficiencies, supporting volume growth.
→Oil & Gas volumes increased slightly by 3% QoQ; exploration wells added to production.
→Overall, Vedanta targets robust volume growth supported by strong domestic demand and operational expansions across metals and energy segments.

Margin guidance

Category 3

→Vedanta is confident of closing the fiscal year with strong performance amid macroeconomic uncertainties (Page 6).
→Operational improvements, cost optimization, and efficient capital allocation support earnings growth (Pages 5-6).
→Aluminum business is expanding capacity from 2.3 MTPA to 2.8 MTPA, targeting 3 MTPA to meet growing demand, supporting volume and profit growth (Page 13).
→Cost of production in aluminum is expected to reduce further (~5-7% in Q4), enhancing margins (Page 8).
→Zinc India and Zinc International are delivering record production, maintaining low costs on the global cost curve (Pages 3,12).
→Oil & Gas production volumes increased slightly with cost reduction, supporting stable EBITDA (Page 8).
→Deleveraging efforts and healthy cash flows enable capital return and growth investments (Pages 6,9).
→Continuous focus on ESG initiatives helps sustainable growth and long-term value creation (Pages 2,12).
→Overall, Vedanta expects robust operational growth and steady improvement in profits and free cash flow going forward.

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Fundraise plans

Yes

→Vedanta is actively managing its debt maturity, with about $2.1 billion requirement for Q1 FY24.
→Plans include upsizing Oaktree facility by $750 million and securing around $0.5 billion from banks (PSUs and multinational).
→They are in advanced talks to close these financings within two weeks from the call (January 2023).
→Additional cash flow from dividends and brand fee payments are expected to cover remaining needs.
→There is no mention of new equity fundraising during the call.
→Vedanta's capital allocation policy prioritizes deleveraging both Vedanta Limited and Vedanta Resources, funding CAPEX, and paying dividends.
→The company maintains a comfortable net debt-to-EBITDA ratio (~0.96) and a strong balance sheet with cash reserves of approximately $2.8 billion.
→No inter-corporate loans (ICD) are planned.
→Overall, the focus is on managing debt through refinancing and cash flows rather than fresh debt or equity raises.

Order book

The provided transcript from Vedanta Limited's Q3FY23 earnings call does not explicitly mention current or expected orderbook or pending orders details. The discussion mainly focused on: - Financial performance, EBITDA, and operational highlights. - Strategic initiatives, capacity expansions (especially in aluminum from 2.3 MTPA to 3 MTPA). - Capital allocation policies including project CAPEX, dividends, and deleveraging. - Updates on ongoing projects like alumina refinery expansion. - Growth outlook in sectors such as aluminum and zinc. - Transaction updates with Hindustan Zinc and semiconductor business discussions. No direct references to orderbook or pending orders metrics were provided in this document.

Capex plans

Yes

→Vedanta's alumina refinery expansion is underway: Train-I (1.5 million ton) nearing mechanical completion and expected to ramp up fully in 1-2 quarters; Train-II aimed for mechanical completion by mid next year and full ramp-up by end of next year, totaling 3 million tons capacity. (Page 11)
→Semiconductor business is currently not under Vedanta's ambit; any future decisions and capex related to this will be discussed when relevant. (Page 12)
→Capital allocation from proceeds (~$2.4 billion upfront plus $0.5 billion later) will be guided by company policy focusing on:
→ - Funding growth and sustaining CAPEX,
→ - Dividend payments,
→ - Deleveraging Vedanta Limited (VEDL) and Vedanta Resources Limited (VRL). (Pages 7, 11)
→Power projects: Planned 4 GW renewable capacity in pipeline this quarter aimed to reduce carbon footprint by 15% in 2 years, contributing toward ESG targets. (Page 12)
→Hindustan Zinc acquisitions (e.g., Meenakshi asset) at attractive valuations form part of strategic investments. (Page 12)

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