Vedanta Limited (VEDL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the First Quarter Financial Year 2026-'27 Earnings Conference Call of Vedanta Limited, Vedanta Aluminum Metal Limited, Vedanta Iron & Steel Limited, Vedanta Power Limited, and Vedanta Oil & Gas Limited. [Operator Instructions] Please note that this conference is being recorded. [Operator Instructions] Without further delay, I would now like to hand the call over to Mr. Charanjit Singh Group Head, Investor Relations, for his opening remarks. Over to you, sir.

Thank you, Sager. Good evening, everyone, and welcome to the Q1 FY 2027 Earnings Call jointly hosted by Vedanta Limited, Vedanta Aluminum, Vedanta Iron & Steel, Vedanta Power and Vedanta Oil & Gas. On behalf of Vedanta, I sincerely thank you all for joining us today to provide our comprehensive and efficient update while making the best use of your time. We are posting a combined call covering all 5 entities. I trust you have had an opportunity to review the respective earnings presentation, press releases and the detailed financial statements, which have been filed with the stock exchanges and are also available on the website of each of the companies. Joining us on today's call are the CEOs and CFOs of each entity, who will discuss their operational and financial performance for the quarter. In the sequence, we will begin with Vedanta Oil & Gas, led by Mr. Jim Gast and Arpit Mundra; followed by Vedanta Power represented by Rajinder Ahuja and Pankaj Jha; Vedanta Iron & Steel led by Pankaj Sharma and Navin Jaju; Vedanta Aluminum, represented by Rajesh Kumar and Anup Agarwal; and finally, Vedanta Limited, addressed by Mr. Arun Misra and Ajay Goel. Following the update, we will open the floor for questions. With that, let me hand over the call to Jim. Jim, over to you.

Thank you, Charanjit. [Foreign Language] We welcome you to the first quarterly Vedanta Oil & Gas results call as a newly listed company. Safety remains our #1 priority. And while we continue to strengthen safety leadership, critical risk management and frontline engagement, our safety performance shows that there is more work to do. At the same time, we have made good progress across ESG. Higher commodity prices supported our Q1 performance, but our focus remains on safe operations, production, delivery, cost discipline and execution of our growth portfolio. Our assets continue to demonstrate resilience whilst maintaining natural reservoir decline. Gross operated production averaged [ 77,700 ] barrels of oil equivalent per day during the quarter, comprising [ 63,100 ] barrels of oil equivalent per day from Rajasthan, 11.6 from offshore assets and 3.1 from OLP blocks. Working interest production averaged 51,100 barrels of oil per day. In Rajasthan, production was supported by well productivity improvement programs, targeted well recovery and continued operational optimization. Offshore performance benefited from production optimization initiatives, including low-pressure operations and focused well interventions, while OALP production remains stable. Our priority remains to strengthen decline management, accelerate well interventions, improve execution and maintain high asset reliability. Over the last few years, we have delivered a positive change in our operating cost profile, particularly for mature tertiary recovery portfolio. The direct operating cost trend demonstrates that cost discipline has been sustained, with full year '27 currently expected to be in line with the full year '26 levels. This improvement has been driven by optimizing commodity consumption, especially through monitoring well patterns and by maximizing well gains through targeted rigless interventions. These interventions are generally faster, lower cost and more flexible than conventional workover activity. The focus is to remain strong cost discipline while supporting safe operations, production reliability and future volume delivery. Cost efficiency must, therefore, go hand-in-hand with execution and the growth. I will now hand over to Arpit, our CFO, for the financial update.

Thank you, Jim. Good evening, everyone. On the financial results, let me elaborate the key numbers for our performance in the Q1 FY '27. Our revenue stood at INR 2,507 crores, which is 3% lower quarter-on-quarter basis and EBITDA at INR 1,232 crores being 16% higher on a quarter-on-quarter basis, resulting in an EBITDA margin of 49% for the current quarter. Our unit operating cost for the period was [ $17.4 ] per barrel, down 3% quarter-on-quarter basis despite the production decline and a lower base. The lower cost was driven by efficiencies and optimization in our workover and well intervention programs. These initiatives reflect our intrinsic focus on cost leadership, with persistent rigor while holistically supporting the reliability metrics. Our profit after tax before exceptional items from continuing operations stands at INR 194 crores. The exceptional costs net of tax is INR 345 crores towards provision for impairment and one-off exceptional items during the quarter. The PAT from continued operations had stand at negative INR 151 crores. Following the transfer of the [ non-mining ] business undertaking that was earlier head in the [ Earthwile Marco ] Energy Limited, there has been a onetime profit from discontinued operations, which stood at INR 1,097 crores. Consequently, the reported PAT for the company from continuing as well as discontinued operations stands at INR 945 crores. Also, we are pleased to inform and share that we have been assigned a long-term credit rating of AA+ stable by both CRISIL and ICRA during the recent months, which reaffirms the company's strong credit profile and robust ability to make this financial obligation. The rating further validates the company's continued resilient operational performance and positive growth outlook. Let me cover some of the specifics on the EBITDA bridge. Quarter-on-quarter basis, our EBITDA is higher by 15%, which is supported mainly by the Brent prices which were [ 15% ] higher quarter-on-quarter basis. This was offset by lower volumes due to the natural decline as one of the key reasons. While year-on-year, our EBITDA remains flat. For the closing remarks, I now pass on to our interim CEO, Jim.

Thank you. Overall, the quarter has had a steady performance. The company continues to focus on volume delivery, on CapEx projects and infills, keeping our costs low and building our exploration and development pipeline, all built on a strong foundation of safety and environment. Thank you. I will now pass it to Mr. Rajinder Ahuja, CEO of Vedanta Power, for insights on their Q1 performance of power entity.

Thank you, Jim, and good evening, everyone. The quarter marks an important milestone in our journey with the Vedanta Power becoming demerged entity effective 1st May 2026. As a standalone power business, we now have a greater strategic focus, sharper accountability and a stronger platform for long-term value creation in power sectors. To give a brief overview of power landscape, India has recorded all-time high power demand of [ 271 ] megawatt in May 2026. To support this, Vedanta Power is India's fifth largest private thermal company with 4.2 gigawatt current operating assets, aims to reach at 4.8 gigawatts by the end of the financial year. Further, we are working on plan to add another 7.2 gigawatts starting from FY [ '28 ] onwards, it will start getting kicked in. Fuel and volume security remained a key focus area for us. Today, approximately 74% of our total volume is secured through medium- and long-term PPAs. While 85% of our coal requirement is backed by long-term coal linking [indiscernible] provider with strong stability and visibility of the revenues and the cost. Coming to quarterly performance. Vedanta Power delivered a resilient operational performance. During quarter 1 FY '27, we achieved sales of 5,224 million units, up 38% Y-o-Y basis, and revenue increasing 31% to INR 2,607 crores. Meenakshi energy delivered highest-ever quarterly EBITDA of INR 112 crores backed by the higher sales volume of around 1,350 million units. Despite import coal prices increasing by over 60%, our team on ground has an exceptional work by containing the coal cost by 12% on Y-o-Y basis. This was achieved by replacing the imported coal with Indian coal. And this time, while we were talking, team was able to consume around 65% to 70% of Indian coal in their operations. Our plan to achieve 100% domestic coal at Meenakshi remains on track, which will improve our cost competitiveness and margins way forward, further insulating us from the geopolitical risk. [ Talwandi Sabo ] improved its plant availability to 86% from 77% on a Q-o-Q basis and achieved higher biomass co-firing of 7.9%, which is highest among the NCR region power plants. The ash utilization remains 94%, with increased ash revenue to INR 9 crores. [ Jajura ] maintained stable operational performance. However, we received favorable regulatory outcomes in short supply meter with potential refund of INR 300 crores in days to come. And also, we have got positive order from the state regulatory commission for recovery of ash sales -- ash caused by up to INR 40 crores annually. These positive outcomes are expected to support the future cash flows. At Sakti, despite the operation disruption, the team has devastated tremendous resilience, and we remain focused on restoring unit funding completion of Unit 2, which will be key for our growth capability for the company. We plan to start Unit 1 by the end of quarter 2 FY '27, and Unit 1 remains on track for completion by quarter 4 of FY '27. Finally, we have also notified our insurance provider who are assessing the impact and the claims for Unit 1, which is duly covered for the losses through insurance. Looking ahead, India's power demand outlook remains very strong, and Vedanta Power is well positioned to capitalize for future opportunities. With that, I now hand it over to our CFO, Mr. Pankaj Jha, who will take you through the financial performance.

So thank you, and good evening, everyone. I will briefly cover the financial performance and capital structure highlights for Q1 FY '27. During the quarter, Vedanta Power reported revenue of INR 2,607 crores, 31% Y-o-Y growth on sales of 5,224 million units, which increased 38% Y-o-Y. While EBITDA for the quarter stood at INR 291 crores, the overall performance was impacted by the [ subsea ] [indiscernible] incident. Nevertheless, the business demonstrated resilience through strong operational delivery and reported highest ever EBITDA at Meenakshi. PAT for the quarter was impacted due to a onetime exceptional item of INR 487 crores. By neutralizing it, PAT before exceptional onetime impact is negative INR 59 crores. Our balance sheet and credit profile continued to strengthen. During the quarter, Indian rating agencies, ICRA and CRISIL, have upgraded our [indiscernible]. Our long-term rating remains strong at AA negative with stable outlook. We have very healthy cash and cash equivalents of around INR 1,130 crores. Net debt remained flattish compared with the previous quarter, reflecting our continued focus on cash flow management and deleveraging. We also successfully raised commercial paper at 8.25%, demonstrating continued lender and investor confidence in the business. Going forward, our capital allocation priorities remain clear: maintaining liquidity, reducing leverage, enhancing fuel security and completing our key growth projects, particularly Sakti Unit 1 restoration and Unit 2 project. These assets are expected to materially strengthen earnings, cash generation and return metrics over the next 2 to 4 quarters. With a stronger credit profile, improving operational performance and clear growth visibility, we believe Vedanta Power is well positioned to deliver sustainable value creation for all stakeholders. I now hand over to Mr. Pankaj Sharma for covering Iron & Steel.

Thank you, Pankaj, and good evening, everyone. Let me take you through the performance for the first quarter of FY '27 for Vedanta Iron & Steel. Vedanta Iron & Steel operates fully integrated business model, supported by strategically located mining assets in Odisha, Goa, Karnataka, Liberia, and downstream steel operations in Goa and Bokaro. And this enables value creation across the entire value chain. During the first quarter, we have delivered a strong operational and financial performance, with a revenue increase of 18% year-on-year and EBITDA growth of 54%. Margin expanded from 11% to 14%, and PAT stood at INR 121 crores. During the period, steel and iron ore production increased by 4% year-on-year, supported by stable and safe operations and enhanced efficiencies. In the steel business, the level production stood at 582 [ kt ], with robust EBITDA margin of [ 12% ]. This was driven by better realization, a favorable export market and continued cost and operational initiatives. In iron ore business, production increased by 4% year-on-year to 2.6 million tonnes and EBITDA margin improved by 24% year-on-year on the back of far better realization and cost efficiencies. Sequentially, the volume we are moderated by seasonal impact during later part of the quarter. On quarter-on-quarter basis, margin lowered due to higher discounts on low-grade ore and elevated [ Olson ] freight costs. On the growth front, our expansion projects continue to progress as planned. During the quarter, we received a stage 1 forest clearance for Bokaro expansion project. We remain on track to deliver the project by end of financial year. The ductal iron pipe project in Goa is progressing well and is expected to be completed during the later part of the year. I will now hand over to my CFO, Navin, to take you through the financial performance.

Thank you, Pankaj. Good day, everyone. During the quarter, revenue stood at INR 3,662 crores, an 18% increase year-on-year, and EBITDA of INR 515 crores, a 54% increase year-on-year. This was on the back of strong operational performance and better realization. The company continues to maintain a strong balance sheet, with net debt-to-EBITDA ratio of 1.3x, and return on capital employed of 16%. This is also reflected in the credit rating of AA stable by CRISIL. Net debt post demerger adjustments stood at INR 2,733 crores as on June '26. Strong operating cash flows helped fund [ 3 ] monsoon working capital requirement and ongoing growth projects. Back to you, Pankaj.

Yes. So in conclusion, we have delivered a strong start to FY '27 with resilient operational performance, improved profitability and disciplined balance sheet management. Our ongoing growth project, expanding mining capacities and integrated business model position us well to capitalize on India's long-term steel and iron ore growth opportunity. We remain focused on creating sustainable value for all stakeholders through operational excellence, responsible growth and disciplined capital allocation. Thank you. Thank you very much. And with this, I hand over to Rajesh, CEO, Aluminum.

Thank you, Pankaj. And very good evening, everyone, and thank you for joining the Vedanta Aluminum Metal Limited earnings update. VAML delivered a strong quarter, driven by industry-leading safety, sustainability and operational performance. During the quarter, we had only one lost time injury. Environment performance remained robust, with 20% cash utilization contributing to increased dike space, while our newly commissioned RO facility improved the wastewater recycling and reduce freshwater consumption by 8%. Renewable energy supply from [ Serentica ] increased to 198 megawatts, a 60% sequential growth, and we remain on track to achieve more than 371 megawatts of green power by the end of this financial year. VAML delivered a record quarterly performance, achieving all-time high aluminum production of 632 kt, up 5% year-on-year and 3% quarter-on-quarter. Alumina production was 826 kt, up 41% year-on-year. Alumina production was, however, 6% lower than the previous quarter due to stabilization issues in the power plant, red mud filtration and bauxite handling. Value-added product output rose to a record 389,000 tonnes in the quarter, up 14% year-on-year, reflecting the continued shift of -- in our product mix towards our goal of 90% share of value-added products. The [ billet ] production increased by 18% and the alloy production increased by 38% with respect to the previous quarter. From a market perspective, global aluminum prices have remained buoyant, supported by supply side constraints. Looking ahead, our focus remains on accelerating growth through ramp-up of [indiscernible] and increased volume from [ Balco ] Port line 3 and sustained cost optimization through additional domestic bauxite. Our captive pool, we have received the mining lease and mine opening permission for [ Purloy ], and we plan to start the mine in this quarter. Supported by a strong execution discipline, we remain well positioned to deliver our long-term value for all our stakeholders. Thank you. And with this, I hand over to our CFO, VAML, Mr. Anup Agarwal, to take you through the financial performance.

Thank you, Rajeshji, and good evening, everyone. We closed Q1 FY '27 on a strong note, marking an important milestone for Vedanta Aluminum as our first quarter post demerger. At a headline level, we delivered an all-time high revenue and EBITDA on the back of strong realization, disciplined cost management and continued operational execution. Revenue for the quarter stood at a record INR [ 21,158 ] crores, reflecting a 45% increase Y-o-Y and a 13% increase quarter-on-quarter. On the cost side, our hot metal cost in Q1 FY '27 stood at $16.98 per ton, lower by 4% Y-o-Y and lower by 3% quarter-on-quarter despite inflationary prices due to the Middle East disruptions. This is within our guidance rate as communicated in [ FIA ]. Coming to EBITDA. EBITDA was at INR 10,499 crores, up 134% Y-o-Y and up 24% quarter-on-quarter. Sequentially, EBITDA per ton expanded from $1,511 per ton to $1,804 per tonne. This was driven by a combination of volume growth, cost optimization, marketing initiatives and favorable market conditions. The profit after tax was at INR 6,597 crores, up over 200% Y-o-Y. Our return on capital employed stood at 42% at the end of quarter 1, reflecting our focus on driving profitable growth while maintaining disciplined capital allocation. During the quarter, our balance sheet became even more stronger. Our net debt-to-EBITDA ratio improved from 1.3x to 0.9x. Our cost of borrowing is now at sub-9%, and this will improve further in the coming months. We closed the quarter with a cash and cash equivalent of over INR 6,000 crores. This provides us with a strong liquidity cushion and enhances our financial flexibility. The Board has approved an interim dividend of INR 8 per share this quarter, the very first for Vedanta Aluminum. Both CRISIL and ICRA have upgraded Veranda Aluminium to AA+ with a stable outlook. This is an important validation of the market's confidence in our balance sheet strength, earnings resilience and financial discipline. Our guidance on the cost for full year remains unchanged at $1,650 to INR 1,700 per tonne. Though in quarter 2, the cost may be marginally higher due to the planned power plant shutdowns tied with the monsoon period. On the hedging front, for the balance here, we've hedged -- we are hedged 28% of our volumes at an average of $3,062 per ton. We are confident that our EBITDA run rate will remain resilient across commodity cycles, driven by higher volumes from [ BALCO ] expansion, increased value-added product and domestic market penetration and continued cost reductions through backward integration. Thank you. And with this, I hand over to Mr. Arun Misra for an update on demerged Vedanta.

Thank you, Anup. Good evening, everyone. As you will all know that this quarter marks the first reporting period of demerged Vedanta, India's most diversified base metal and specialty [ alloyed ] company, providing investors with exposure to zinc, copper, silver, lead, manganese, nickel and ferrochrome. I'm pleased to note that in the median quarter itself, since demerger, we have delivered EBITDA of INR 8,459 crores and PAT of INR 5,294 crores for the continuing businesses. Let me now walk you through the operational performance of the key business segments. At Zinc India, refined metal production grew 4% year-on-year to 260,000 tonnes. We achieved lowest ever cost of production at $851 per tonne. Silver continues to contribute strongly to our bottom line with 46% share [indiscernible]. At Zinc International, overall mine metal production was 48,000 tonnes, including contribution of 3,012 tonnes from [ Black form mine ]. Gamsberg Phase 1 production rose 10% sequentially to 45,000 tonnes. Gamsberg cost of production also declined to $1,549 per tonne, down 7% quarter-on-quarter, delivering an EBITDA per tonne of $900. At BMM Swartberg mine end-to-end contract in [ Europe ]. This substitution has been completed and ramping up on variable cost model. In ferrochrome business, FACOR delivered its highest ever quarterly ore production, up 41% year-on-year to 153,000 tonnes, surfacing previous base of 113,000 tonnes in quarter 4 '26. Improvement in finished good grade supported by higher market price resulted in 2% higher net sales realization alongside lower cost, driven by 100% captive over availability. This resulted in EBITDA margin improving from $360 per tonne, up 13% sequentially, also delivering the best ever quarterly EBITDA of INR 101 crores. Copper India recorded sales of 53,000 tonnes, up 3% year-on-year, our highest first quarter sales in 8 years. At Copper International business, rod sales were down 51% year-on-year as the supply chain in the entire Middle East region was impacted due to geopolitical tensions. Moving to growth projects across the 4 segments. At Zinc India, for the fertilizer plant, coal commissioning has been initiated. The hot acid leaching plant at [ Dariba ] is also targeted for commissioning in the current quarter. The 10 million in [ Paranam ] selling reprocessing plant is under construction and is expected to be completed by quarter 4 of FY '28, while the 250,000 tonnes per annum expansion project of smelter is expected to commission by quarter 2 of FY '29. At Zinc International, Gamsberg Phase 2 plant is likely to commence operations in August. It will add another 200,000 tonnes of MIC capacity, taking the total capacity to 450,000 tonnes per annum. At FACOR, production from Ostapal underground mine is likely to commence in the current quarter, yielding better FG grade and metallic volume. We received a forest clearance Stage 1 for [ Tapas ] manganese mine and is expected to start operation in H2 of this current fiscal year. At Copper India, Phase 1 debottlenecking has augmented installed capacity to 222,000 tonnes per annum. Further debottlenecking will take this capacity to [ 229,000 ] tonnes per annum. Copper International at our [ Jabal ] site exploration block in Saudi Arabia, exploration partner has been finalized, targeting 24 months for the initial phase. To summarize, performance of continuing businesses in demerged Vedanta is on a steady growth trajectory as reflected by a strong quarter 1 delivery and project commissioning lined up during the year. We remain focused in our pursuit of growth of the demerged Vedanta with a $5 billion EBITDA enterprise by FY '30. With that, let me hand it over to Ajay to take you through the financial performance in detail, after which, we'll be happy to take your questions. Ajay?

Yes. Thank you, Arun. Good morning, everyone. We're meeting today for the first quarter results after Vedanta's historical demerger, and that is unlocking significant value with a combined market cap of resulting companies growing over INR 71,000 crores in Q1 itself. I want to also clarify that as a demerger has become effective, during the quarter on, 1st of May, the stat numbers which are reported include 1 month of [ discontinued ] operations as per the [indiscernible] 105. For the sake of like-for-like comparison, we will focus on performance of Vedanta's continued operations, which is for the entire quarter happened in June. So the numbers are comparable and therefore, entire quarter happened through June. I'll start briefly with Vedanta highlights. On Vedanta Limited's Q1 performance, revenue increased by 51% Y-o-Y to INR [ 23,456 ] crores. EBITDA nearly doubled, rising by 98% Y-o-Y to highest level, INR 8,469 crores with a margin of 57%, up [ 9 85 ] basis points Y-o-Y. Profit after tax, PAT, grew to INR 5,294 crores, up INR 152 crores Y-o-Y, again, best ever on a like-on-like basis. In Q1, Vedanta invested INR 1,148 crores in growth CapEx, while deleveraging the balance sheet by more than -- more than INR [ 2,226 ] crores. At the same time, delivering a strong ROCE of 28%. In Q1, Vedanta's balance sheet remains exceptionally strong, with leverage ratio net debt to EBITDA down to 0.3x, amongst the best in the industry. Vedanta Limited has been rated AA+ with a stable outlook, both by ICRA and CRISIL, highest rating over a decade for us. With a strong cash and cash equivalent of INR [ 19,922 ] crores remains resilient, at the same time growth. I'll go on very briefly to Vedanta Resources, the VR highlights. VR's greatest strength is well recognized with the rating upgrades from all 3 agencies, S&P, Fitch, and Moody's rating VR to BB or BB equivalent, again representing a dated high rating for OVR. The demerger as we earlier envisioned has significantly enhanced strategic optionalities available to Vedanta Resources. You may have made a note that during the quarter, we have sold 1.7% stake in Vedanta Limited. That is almost 200 [ million ], and that illustrates the range of strategic levers to accelerate for the fast track debt production at Vedanta Resources. We are deleveraged by 1.1 [ million ] across the group in Q1 itself. In this quarter, through a broader 5 [ billion ] refinancing program at Vedanta Resources, we are targeting production of around 280 basis points in average funding cost at Vedanta Resources. This will lead to more than INR 1,000 crores of interest cost savings on a yearly basis. We have recently raised 1.7 billion from international on markets at average 7.4% coupon rate and average maturity of 8.5 years. And additionally, kind of a syndicated term loan of up to 2.25 billion at 6.4% interest rate with a maturity of 3 years. Overall, this would significantly flatten VR's repayment liabilities and that can be serviced to regular branching and a normal dividend yield. In conclusion, the demerger has relayed the foundation for the next phase of growth, backed by strong VR balance sheet, focused businesses and allocation of capital. With this, I now will hand over to operator for Q&A.

[Operator Instructions] Your first question comes from the line of Akhilesh Kumar with Emkay Global.

Yes, can you hear me?

Yes, we can.

Yes. Perfect. So my first question is on EBITDA for the VAML. So when I try to add the EBITDA given in the slides for [indiscernible], the total EBITDA comes at close to INR 10,527 crores, while total reported EBITDA is, as you mentioned, is INR 10,499 crores. So can you explain the difference?

So that's a small control adjustment actually. It depends whether you're talking about it gets eliminated at a -- level. For the transaction between [ Balco ] and [indiscernible].

Okay. So -- okay. So this is something intercompany kind of stuff, is it?

Yes, absolutely.

Okay. Okay. My second question is on the aluminum sales made this quarter. So I appreciate that you have given the aluminum production for this quarter, but earlier you used to give the sales number as well, which is not mentioned in this slide. So if you can provide that number as well, that will be great.

So the sales numbers for the quarter is at 615 kts.

615 kt.

Your next question comes from the line of Indrajit Agarwal with CLSA.

A few questions. First, I'll start with the aluminum business. So our ask rate for alumina production for the last 3 quarters is almost 1.1 million tonnes. So how do you -- to achieve the 4.1 odd million tonnes for the full year. So how should we look at the trajectory? Will it be more second half heavy? And given the exit run rate of 1Q and what we are doing in July so far do? Are you confident of achieving that number?

Yes. So typically, the monsoon months, both for the power assets as well as the alumina production, are slightly difficult months. So we expect a much higher volume in the H2. If you would have noticed, even the last year, the trends were similar. And this year also, we will follow the same trajectory. And we will meet -- estimate which you have given of 4 million to 4.1 million tonnes of alumina production from Lanjigarh.

Sure. Secondly, on purchased alumina cost, despite aluminum -- on sequential basis, alumina COP going up and alumina integration going down, your alumina cost in aluminum has gone down. So what has been the delta in purchased alumina cost in this quarter? What you have booked in P&L.

Indrajit, on a broad level note, as you have rightly said, alumina cost has come down 3% quarter-on-quarter. And if you would recall, even in the last earnings call, we very clearly articulated that -- but for the higher LME and the higher API -- as we go into the quarter -- as we go into the second quarter of this financial year now, we will start seeing alumina costs closer to [ $750 ]. Okay, now $780 is what we reported in quarter 1. Now with increased mix -- and you would have seen that we have done around 70%, 72% in quarter 1. And with the same active mix in quarter 2 and lower API, we are in route to that $750 number, what we talked.

And is there further room for API prices to go down in the subsequent quarters? Or we have already bottomed out over there?

Yes, I can tell you, see, the further reduction will again come as we ramp up Lanjigarh production because going forward, our [ capti ] mix will keep going up and the bought-out alumina will keep coming down. So any reduction from here towards 700, we will have to look at Lanjigarh ramping up. And of course, some of our captive bauxite coming into the play.

Sure. And in 1Q, what was the hedging volume and price at which we had hedged?

Quarter 1, we had held around 293 kt and a strike price was [ 2 8 1 3 ].

Sure. One last question to Ajay, if I may. Given the high CapEx or the growth projects at Vedanta demerged entity, can we assume that most of the dividend would now be from Vedanta Aluminum of the 5 entities in terms of quantum, let's say, rupees crore or dollars kind of tonnes?

So the way to look at, Indrajit, I mean, if you look at historically, Vedanta [indiscernible] has been quite high, in fact, double digit, 12%, 13%. And over the last couple of years, down to 6, 7 percentage points. Our last commitment was to go down to normalized yield of almost 5%. That on the combined market capitalization may be 1.5 odd billion payout on a consol basis of all the 5 business units. Now you will appreciate, Indrajit, that will be a Board matter. But one way to model this, look at the combined market capitalization of each business and look at 3% to 5% [ dividend yield ]. So you are right, Vedanta Aluminum, being almost at about [ 18 billion, 20 billion ] out of 35. Practically, one may also assume, half the dividend will come from Vedanta Aluminum going forward.

Your next question comes from the line of Sumangal Nevatia with Kotak Securities.

First question is to Ajay, on the overall capital allocation. So one is at the VR level, can we assume that a large part of deleveraging is behind now given that we've refinanced? And going forward, the focus would be more on growth? Or we're expecting further deleveraging from $4.5 billion debt? So when is that? And then at VAML, just want to understand what sort of debt or leverage we are comfortable beyond which we will consider paying dividends? And the Chairman has spoken about expansion plans. At what stage do we start spending towards the next phase of expansion, by which we should expect some lower dividends and deleveraging?

Sure, Sumangal. I'll start with the first part first. You're right that at VR, the deleveraging has been accomplished to a large extent. And over the last 3 [ audios ], debt $10 billion down to $5 billion as of June 30. Going forward, what is the path forward? What we have last time committed that the VR debt has come down from $5 billion down to $3 billion. We also committed that Vedanta [ Kenya ] on a combined business PD merger, our leverage of 0.9x as of March will be coming down to 0.7 as of coming March on a consol basis. Now when we look at the capital allocation policy, the central theme is allocation and not capital necessarily. We don't provide guidance in terms of EBITDA. I think one has to model looking at the current run rate. With the current volume, cost and portionality and our macro tailwinds came consol for currency and the pricing, the outlook for the EBITDA for Vedanta India on a consol basis is at about 9.5 billion to 10 billion. Our EBITDA to cash conversion is typically 2%. That means we'll be having total free cash flow of roughly 5,045,000 crore at Vedanta India on a consol basis. So we don't have to make choices between growth and deleveraging. Going forward, what we are looking at, we will be investing for the group in the current year at about INR 20,000 crores EBITDA CapEx across the 5 entities. We're looking at deleveraging at VR level roughly 2 billion, 2.5 billion against INR 20,000 crores. At the same time, we'll also be rewarding shareholders through dividend. Eventually, both deleveraging and rewarding shareholders should lead to [ TSR ]. So in short is, Sumangal, we don't have to make choices between investing for the growth or deleveraging, both in the current year and coexist given robust free cash flows.

Also, Ajay, I think Sumangal, [indiscernible] add, last 3 years of deleveraging has not caused, unlike other companies, any postponement of a declared CapEx or any intentional slowdown of a CapEx project that has been announced in the market. Rather, in last 3 years of deleveraging, we have initiated much bigger projects without -- things like expansion of 1 million tonne expansion in zinc, aluminum, completing the [ Balco ] project, ESL Bokaro, completing that 2 million tonne expansion project or keep on working on 2 million tonne expansion projects. All these -- [indiscernible] phase 2, all this happened in the last 3 years. So these 2 are as Ajay has correctly said, it is not one or the other, it is one and the other.

That's very clear. If you can just share some more thoughts on the VAML balance sheet and debt levels which we are comfortable and some expansion plan going forward.

I refer to Mr. Anup Agarwal.

See, if you look at our financials as at end of June, the net debt in our books is around 33,000, okay. Now for the growth that we've undertaken or we are invested in, we have a CapEx left of around [ INR 7,000 crores, INR 8,000 crores ], which will be spending in, say, 18 to 24 months. That includes BALCO, some left over Lanjigarh augmentation and the mine project. Now coming to the new expansion [ 3 NTPA ], presently, we explained last time also, as of now, we are on a drawing board. We are in the process of land acquisition, finalizing the technology partners and the packages. And as and when we will have details, we will come to the board. But today, if you ask me, the net debt stands at -- sorry, INR 29,500 crores. The leftover CapEx to be spent on the growth already announced is around INR 7,000 crores to INR 8,000 crores, including BALCO. And that's it.

And what would be the -- I mean, total CapEx for '27 and '28, so INR 7,000, INR 8,000 and plus some maintenance, right?

Yes, broadly, yes. For this year, it will be around INR 5,000 crores plus another, say, INR 2,000 crores of maintenance.

Understood. So is it safe to assume that the next phase of growth, at least, since the plans are not yet firmed up, will start towards the end of '28 CapEx or maybe in '29 only?

As I said, maybe in a quarter or so, we will come back to the market with further scale.

Understood. I have a couple of more questions. One on VISL, I just want to understand what are the next key hurdles and milestones we are looking at for starting or completing the expansion of Bokaro Phase 2?

Navin, Pankaj, over to you.

So for ESL, I will say that in this quarter, we have received the Stage 1 forest clearance. And we are in the process of getting Stage 2, and we are expecting, by end of quarter 2, we will be completing that clearance. And by end of this financial year, we will be able to complete the expansion project.

Understood. Understood. And just one last question on aluminum again, sorry. What is the difference of delivered price of bought-out alumina versus captive? And with Sijimali coming in, what sort of cost savings do we expect purely from the captive bauxite mine?

See, broadly at today's API and assuming that this Middle East prices will normally bottom out or will even out, the difference will be to the tune of $50, $60 when you look at the mid captive alumina versus the bought out alumina. Now this captive alumina also has 50% of the imported bauxite. And to address your question that once Sijimali starts ramping up, we can expect, say, another $40 to $50 per tonne reduction. And it will all depend on what percentage of Sijimali we will be able to ramp up and how soon we will be able to ramp up. The idea is to start it after monsoon. This year, we're expecting 1 million to 2 million tonnes. And the next year, it can be between 6 million to 7 million tonnes.

Okay. Got it. So $40 to $50 at the alumina level, right?

Yes, our numbers I spoke was on the alumina.

Understood. Sir, but I mean, we've just got Stage 2 forest clearance EC. So I think mining lease and then consent to operate all these approvals can come within the next couple of months and we can start production by fourth quarter. Is that a realistic expectation?

Given the current scenario, yes, we expect -- we have made good progress in the last quarter in terms of getting up to [ FC2 ]. Now we are -- the efforts are on. We are working very closely with the government. And this is how we look very positive. The government is also very positive in terms of investments in the state. So we are quite hopeful that this is what will happen.

Understood. And just one last clarification. So all these mines is under [ VAL ]. So what is the transfer pricing to BALCO? And is it fair to assume that all the cost saving, et cetera, will be reflecting more under VAL than BALCO?

So the transfer is at arms-length and we are governed by that. As regards transfer from the Lanjigarh to BALCO is concerned. Just to clarify. Now when you're talking about the mines, BALCO also has one mine by the name of [ Barak ]. So the coal will come from there. Rest of mines are with VAML, which will be used for VAML's own use. And coming to bauxite, then the idea is to take it to Lanjigarh what Rajeshji said that any alumina from Lanjigarh to BALCO is today also at arms length business.

Sumangal, thank you. We have a very long queue of people who are waiting with you for questions. So...

Your next question comes from [ Sabri ] with Emkay Global.

Just one question. So if I look into your oil and gas numbers. So my oil prices have gone up by around 30%. My production is down by around 4% to 5%. But still, my revenue has remained flat Q-o-Q. And my [indiscernible] is also up INR 200 crores only because of this increase in stock, whereas my OpEx exit [indiscernible] has remained same. So can you just give an explanation for this? Why it has remained largely flat Q-o-Q?

This is Arpit here. I'm the CFO for the Oil & Gas business. If you see quarter-on-quarter, given the cyclic nature of our sales pattern, you note about 85% is the volumes that we have sold. And post-monsoon, this will get liquidated as a typical sales pattern that we have. Does this clarify your question or anything else?

So if the production and sales number has got a deviation due to which the numbers are like this. Yes, okay, got it.

The next question comes from the line of [ Amit Murarka ] with Axis Capital.

So just on the hot metal cost. This quarter, I think it's gone down a bit. So just wanted to understand, like, one, how you -- I mean given the inflation that we were seeing, generally speaking, on fuel cost and power cost in the quarter, what are the factors that have reduced the hot metal cost for you? And secondly, what was the outlook for the cost going ahead?

Anup?

Yes. Thank you, Ajay. So see, I already covered -- now let me first cover. For the quarter 2, we expect the cost to be marginally higher, and we said that because of the planned shutdowns, and you would recall that during the monsoon period, there are normally some power plants shut down. So the cost will be marginal. Now coming to the quarter-on-quarter, see the cost has come down due to increased captive consumption of alumina, the lower coal price per se -- and of course, if you will -- because we are talking dollar, you can also say that a little bit of a rupee cost divided by dollar is also there. Why I'm saying this is because as you would recall, last quarter also, we said that during -- post this Middle East disruptions, we have been hit by the carbon cost and the furniture cost. So on a net-to-net basis, if you look at our guidance, what did we say? 1,600, 1,500 to 1,700 and additional $50 to $100 for the Middle East disruption. So we are very much there in the target. And as I stated in my commentary also, that we will be within our guidance of [ 1,600, 15 to 17 ] as we complete the year.

Sure. Understood. And just a comment that you could give on the lower sales volume, while production, as you mentioned, is the highest ever. The sales volume has not inched up in the quarter. So why was this inventory build up there in Q1?

There is -- see, what happens, normally at the fourth quarter or the end quarter, there is a tendency to clean up the stock. So to that extent, we will see, some 78 kt has been added. Otherwise, there has been no addition to the inventory. Because normally -- in the quarter, in the year, there is a tendency that we wipe off the inventory lying at the stock and everywhere.

The next question comes from the line of [ Pinakin ] with HSBC.

[indiscernible]

Pinakin?

Yes. Can you hear me? Am I audible?

Now you are audible. Please go ahead.

Yes. So can you -- Sorry. Can you walk us through the Sijimali bauxite mine process? So there was a stage 2 forest clearance. What are the approvals from here? What are the time lines you're expecting? To get us an idea of when can we actually start mining? And where are the approvals required at national state and other agency levels?

So we finally have to get the consent to operate. So we are getting that -- in the process of getting that. And we expect that to happen in this quarter. And as mentioned, after this quarter monsoon and rain, we plan to start the mine.

Okay. So just to be clear, the consent to operate is the only approval required. And after that, you can start mining?

Yes.

Understood. And taking forward the process from a regulatory to actual mining, right, what are the activities on the ground you would -- because I assume this is a virgin mine, you would have to overburden removal, the preparation of roads and everything. So how long a process do you see of work on the ground before you can scale up to, let's say, 4 million to 5 million tonnes of bauxite mining?

So compared to coal, bauxite is slightly easier to mine and very little overburden and these things are required. And in addition to that, we operate through MDO partners who develop the -- to do the mining for us and deliver the ore. So we have already appointed the MDO partner for Sijimali. And so we are ready. In fact, the preparation was done at the beginning of the year itself for -- as far as the mining activity is concerned. So as soon as we get the approval, the mining can start.

Got it. And my last question is on coal. Given that the mining operation permission has been obtained at the Kuraloi coal mine, what is the mine volumes that you expect in F '28 and '29? And secondly, if you were to draw a similar parallel for the Ghogharpalli mine, what kind of coal production can we expect over the next 2 years, '28 and '29?

So we expect from Kuraloi this financial year to mine up to 2 million tonnes. And Ghogharpalli, we are just evaluating. But this year, I think we will wait when we get -- start the work to estimate.

And Kuraloi can increase to how much from 2 to next year?

8 million tonnes.

It can -- you are confident that you can go to 8 million tonnes next year if you start this year?

Yes, this year too and next year, 8 million tonnes is our current plan.

The next question comes from the line of Ritesh Shah with Investec.