Vedanta Limited

Thank you, Stanford. And hello, everyone.

I am Sandep Agrawal. On behalf of Vedanta, I am delighted to welcome you to our fourth quarter and full year FY '22 earnings call.

We have with us today, our group CEO, Mr. Sunil Duggal; our group acting CFO, Mr.

Ajay Goel. We are also joined by Deputy CEO, Aluminum, Mr.

Rahul Sharma; Deputy CEO, Oil & Gas, Mr. Prachur Sah; CEO, Iron & Steel, Mr.

Sauvick Mazumdar. We will start with update on key highlights of our performance and then answer the questions, which you may have.

Please note, today's entire discussion will be covered by safe harbor clause mentioned on Page 2 of the presentation. Now without further ado, I would like to hand over to Mr.

Duggal to take us through the presentation. Over to you, Mr.

Duggal.

Thank you, Sandep. Hello, everyone.

Welcome to Vedanta Limited Fourth Quarter and Full Financial Year '22 Earnings Conference Call. The commodity market had a remarkable spell in the financial year 2022, initial -- driven by another crisis in China, natural gas shortage in Europe, coal supply shortage due to Australian-Indonesian coal supply curtailment and then due to Russia-Ukraine conflict.

Metal supply chain is seeing disruptions with increased energy costs, financing issues due to sanctions on Russia and logistic issues due to trouble in ports access from Russia and Ukraine. Production cuts by various [ Japan ] manufacturers, particularly for aluminum and zinc, coupled with abysmally low inventories have led to all-time high metal prices.

Oil and gas prices have also jumped amidst increased demand and Europe's high dependence on Russia's oil and gas. It appears that strong supply side disruptions continue to outweigh potential of economic risk from high inflation and rising COVID cases in China.

Metal prices can remain elevated for longer, especially in short to medium term. Indian economy remained resilient on the back of record exports, improving manufacturing and services, government-led infra spending, bond, GST and other tax collections.

Rising investment proposals indicate investment cycle revival. The core sector output growth was also at a 4-month high of 5.8% Y-o-Y in February, signaling a rebound in industrial activities.

Vedanta continues to deliver strong performance underpinned by asset quality and business model strength. We have delivered best-ever annual financial performance with an EBITDA of INR 45,319 crores and strong free cash flows driven by record volume growth across our key businesses.

EBITDA margins remained strong despite inflationary pressure on cost of production. In line with our earnings distribution track record, we had record INR 45 per share dividend payout in FY '22.

As per our redefined ESG strategy, our overall purpose is supported by 3 pillars. Under the first pillar is our transforming the community.

We have worked to uplift the quality of communities through various initiatives, including drinking water sanitation, health care community infrastructure, children well-being, et cetera. 4.36 million lives benefited across 1,268 villages.

We are proud to announce that we established more than 3,200 Nand Ghars, benefiting 2 lakh 40,000 children and women. Under the second pillar of transforming the planet, we took a very significant action by signing 580 megawatts of renewable power delivery agreement.

We launched Restora and Restora Ultra brand of green aluminum to usher a new era of green metals. In line with our aim to move to a greener business model, Jharsuguda dispatched first fly ash rake to [ certain ] plant.

We are saddened by loss of 3 lives in the fourth quarter. Our senior leadership team has completed incident investigation.

The outcomes have been shared immediately with all our sites to deploy the learnings. Safety stand-downs have been conducted across the sites to communicate learning to all employees and business partners.

We are making steady progress towards aim to ensure gender parity, diversity and inclusivity across the organization from the senior leadership and decision-making bodies to our SBU and enabling functions. Our aim is to strengthen our position as an equal opportunity employer.

We have launched group-wide program, [ Green Spark, ] to scale our partnership with innovative start-ups to leverage their technological capability at execution speed aimed towards achieving strategic goals and operational excellence, new product development and 360-degree sustainability. For the Atmanirbhar Bharat, India needs to reduce electronics import.

Semiconductor, which is a critical raw material for electronics manufacturing, has a significant demand-supply gap. We are partnering with the largest global player, Foxconn, to start semiconductor production in 2 years' time.

This is a very large potential for shareholder value creation. Now I will turn to business verticals.

Our Aluminum business recorded highest ever annual aluminum and alumina production of 2.3 million tonnes and 2.0 million tonnes, respectively, driven by strong focus on operational excellence and asset optimization. Fourth quarter was also exceptional with 8% Y-o-Y metal production growth.

Quarterly aluminum COP was $2,182 per tonne, impacted by input commodity headwinds, particularly power cost. With our continued focus on growth and integrated operation, Aluminum business has now become second largest contributor in group's profitability.

It is poised to be third largest global player, ex China, with $1.4 billion CapEx program over the next 2 years for growth and vertical integration to create sustainable value and reduce market volatility impact. Zinc India achieved historic high mined metal production, crossing 1 million tonne mark.

Quarterly mined metal production was 295 kt, was also best-ever since underground transition. The cost of production was down by 1% to $1,136 per tonne on Q-o-Q basis.

And input commodity inflation impact was more than offset by higher volumes, operational efficiency, including improved recoveries and favorable LME. Zinc International Gamsberg is now well poised to deliver significant value.

Gamsberg achieved 220 kt annualized run rate or MIC production in the month of March. The COP decreased -- increased mainly due to spend on south pit recovery project and exchange rate appreciation.

We successfully financed the commissioning of the Zinc Rougher Cell, which resulted in 3% to 5% recovery improvement. We are spending $466 billion to increase Gamsberg MIC capacity to 450 ktpa.

Gamsberg has potential to become South Africa's largest zinc producer and one of the biggest smelting -- big smelting complex in the world. Oil & Gas business operations remained stable.

The natural field decline was largely offset by volume addition with infill wells, polymer injection and RDG field gas ramp-ups. OpEx increased to $12.4 per tonne -- per barrel in the fourth quarter, primarily on increased polymer prices in line with higher oil prices and polymer consumption to arrest declines.

We notified 2 OALP hydrocarbon discoveries, Durga-1 in Rajasthan and Jaya-1 in Cambay, adding 40 million barrels to resources. To augment our reserves and resources and mitigate natural decline, we'll spend $687 million on exploration work in OALP and PSC block, infill well programs and shale exploration.

In Iron Ore, we achieved highest ever annual production with 30% Y-o-Y growth. Quarterly sales grew 17% Y-o-Y with support from all key operational projects.

VAB achieved record annual production of 790 kt. We have recorded highest ever annual margin of $111 per tonne.

Quarterly margins were down due to higher coking coal prices after a partial offset from higher steel prices. Steel delivered record annual hot metal production of 1.36 million tonnes through enhanced furnace operations.

Quarterly hot metal production grew 3% Y-o-Y. The margin was higher by 10% Q-o-Q, mainly on improved market despite input commodity headwinds.

We commenced commercial production from recently acquired 2 iron ore mines in Orissa. This will enable ESL to have 100% iron ore security.

FACOR continues to -- its turnaround journey. It achieved a historic annual ferrochrome production with 10% Y-o-Y growth.

Our annual EBITDA margin was up by 3x Y-o-Y to $534 per tonne. Quarterly ferrochrome production was 18 kt, lower due to maintenance shutdown.

Overall, if you see, we have made significant progress across our strategic priorities, creating value for our stakeholders. Our world-class assets have delivered outstanding financial results driven by operational performance and supportive commodity prices.

Our underlying businesses remain strong, and we are committed to make it stronger through growth, vertical integration of operational efficiencies, unlocking through technology and digitization and targeted acquisitions. With this now, I would like to hand over to my friend, Mr.

Ajay Goel, CFO, for the financial performance.

Thank you, Sunil, and good evening, everyone. We achieved our best-ever financial performance not only for the quarter, but also the full year was a record year in terms of various financial metrics by a significant margin.

This quarter witnessed our highest ever revenue and EBITDA performance and the leverage ratio, which is net debt to EBITDA, was the lowest in the last 5 years. The quarter was benefited by positive operational performance across our key businesses and favorable sales realization following strong demand and elevated commodity prices for all our major commodities, namely zinc, aluminum or [ Brent.

] The record earnings and result in cash flows supported the full year dividend of INR 45 per share with the total quantum of dividend payout as INR 16,728 crores. I'd like to highlight a few of the vital few numbers for the fourth quarter, the quarter just bygone.

Highest-ever quarterly EBITDA of INR 13,768 crores, up 51% Y-o-Y and up 26% with an underlying margin of 39%. We maintain the leadership position across the industry on margins.

PAT before exceptionals and any onetime gains stands at INR 7,570 crores, up 48% Y-o-Y and 40% quarter-on-quarter. We continue to maintain our strong liquidity position with cash and cash equivalents at INR 32,130 crores.

With that, the net debt stands at about INR 21,000 crores, which is down 24% quarter-on-quarter. Let me add, this is the quarter where we also paid dividend.

So net debt is down 24% quarter-on-quarter, with net debt-to-EBITDA ratio of 0.5, which, again, as I mentioned, is the lowest in the last 5 years and is the best amongst Indian peers. I also want to call out a couple of key numbers for the full fiscal FY '22.

All-time high EBITDA of INR 45,319 crores, up 66% from the previous year with an underlying margin of 39%. PAT before exceptionals and any onetime gains stands at INR 24,299 crores.

It is up by 95% from the previous year. The ROCE, return on capital employed, was 30%, which is 1.6x higher versus last year's number of 19%.

So our profitability is raising ahead of need for the capital. We have a detailed income statement in the appendix, and I want to just update you on a couple of items in that income statement.

It's in the Page #31 in the IR presentation. Depreciation charge for the fourth quarter was INR 2,379 crores.

It is 16% higher Y-o-Y due to higher overall depletion charge for RDG and Oil & Gas and higher Ore volumes and capitalization at Zinc. The depreciation quarter-on-quarter increased by 5%, which is in line with the business magnitude for the current quarter.

The finance cost for Q4 was INR 1,333 crores, up 1% Y-o-Y, primarily on account of onetime prepayment charge on loan refinancing. It is partly offset by lower average borrowings and lower interest rate.

Income from investment for the fourth quarter was INR 520 crores, down 40% Y-o-Y and up 1% quarter-on-quarter due to MTM accounting, mark-to-market movement and change in the mix of the investment. The normalized ETR for the full fiscal stands at about 28%, which is in line with the guidance provided.

As you know, the normalized ETR excludes any tax on exceptional items or any deferred tax asset reversals on the losses. I now move to EBITDA bridge.

So we have -- the EBITDA is up 51% Y-o-Y and 26% up quarter-on-quarter. As you may have seen from the bridge, the strong demand for all our commodities and higher pricing have positively impacted our EBITDA, along with higher volumes across all our key businesses.

This has been partly offset by input inflation across various commodities, specifically in the Aluminum business. Moving on to the net debt bridge.

Net debt as of the year-end March 31 stands at about INR 20,979 crores, reduced by INR 6,590 crores from the previous quarter. This is supported by strong cash flows from operations and partly offset a payment of dividend in the fourth quarter and CapEx spending.

From balance sheet viewpoint, long-term strategic balance sheet management is a key enterprise-wide priority for us. The average maturity for long-term debt is about 3.5 years with an average cost of borrowings at 7.9%.

The 7.9% has come down to 7.7% as of March end. I'm very happy to report to you that our rating has been augmented to AA with a stable outlook in the fourth quarter, both by India Ratings and CRISIL, and that demonstrate our strong financial performance and the free cash flows.

As you are aware, we announced our allocation of capital policy in the fourth quarter sometime in February. This policy establishes various guardrails on allocation of funds.

The policy focuses on rapid and responsible growth with the key objective of deleveraging across the group, and at the same time, maximizing shareholders' value. Our CapEx program is progressing quite well, and it is in line with overall policy on allocation of capital, which intends to invest in next phase of growth projects.

You may have seen on the guidance provided for the current fiscal as in F '23, we have planned for INR 2 billion of growth CapEx in the current year, wherein we are investing in Aluminum business towards vertical integration. We are also investing in Oil & Gas to augment Iron Ore and mitigate any natural decline in the oil fields.

We are also looking to double the capacity at Zinc International and ESL. In FY '22, we achieved highest ever cash flows before CapEx of about INR 3.6 billion, which shows the strength of our operations.

Our CapEx programs over the various previous years have been largely self-funded, and we will continue doing so in near future as well. Overall, in summary, with an excellent yearly performance, we delivered record profitability.

We are progressing well on the path of deleveraging and rewarding shareholders through consistent dividend. I also want to mention that we ensured highest level of corporate governance and transparency with clean statutory audit report across the group as at year-end.

With this, we are confident that we will continue to sustain our strong performance in the current fiscal as well and create further value for the shareholders. Thank you all, and I go back to operator for any Q&A.

Congratulations for a good set of numbers. I have 2 questions.

The first one is essentially on the green aluminum products, Restora and Restora Ultra. If you can throw some time line -- some light on the time line, the volume and the premium that these products will command over your regular aluminum product.

That is the first question.

So may I go ahead with the first question? Or you want to go ahead with second.

And then I...

Yes. So I can...

No. I think I'll answer this.

So these are 2 products. One is Restora and Restora Ultra.

Restora Ultra is made with the green power, so renewable power, it was made. So it has the intensity of, say, 3.2 tonne of CO2 per tonne of metal compared to a traditional 17 to 18 tonne of CO2 per tonne of metal.

So this is Restora. And the other is Restora Ultra.

Restora Ultra is made from the aluminum dross. So the aluminum dross is normally dumped in the secure landfill.

So our secure organization, Runaya, set up the technology to process this dross to convert it into aluminum. So with this, the overall -- the carbon per tonne of metal is around 0.32.

So yes, 0.37, not 0.32. There's a 0.37 tonne -- per tonne of metal.

So this is Restora Ultra. And I may also tell you that the -- as per the global standard, the green metals are made with CO2 of 4 tonne CO2 equivalent per tonne of metal.

So even our Restora metal is better than the global standard, and the Restora Ultra is also better than the global standard. So these numbers have been ratified and verified by DNV, the third party.

And based on that certification, we have launched this product in the market. This is enabling us to earn a good premium from the export market.

But my colleague, Rahul, is also -- anything you want to add on what premium we are earning from the market on this?

No, no. Thanks, Mr.

Duggal. I think the point is that why we have gone for it, it's obvious reason.

We want to be -- see that from metal side and more from the ESG side. That's a part of our journey to make 25% GHG -- sorry, 25% GHG reduction by 2030.

And that was the first product which has been launched last year -- has been registered and launched as Restora brand, as Mr. Duggal said there.

This product has -- better than the global average, which is less than 4 tonnes CO2 emission of -- per tonne of aluminum. And last year, as we say that we have already produced 130 kt.

And this year also, we have already a customer with us and we'll continue to ramp up the volume. But that's the volume which we did last year.

And more than the premium, I think, is more of a segment, which is more friendly or more conscious about the environment. They are demanding, and we are contributing towards our ESG goal and the demand.

Okay. The second question is essentially on the balance sheet.

So -- and cash flow. So if I look at the working capital buildup, that is almost INR 20,000-odd crores.

INR 8,100 crores has been receivable. But if I look at the balance sheet and the trade receivables, they are -- they have gone up, but not to the extent of INR 8,100 crores.

So just wanted to understand where the remaining receivables have gone.

Yes. Sure, Amit.

So if you also look at the overall -- the bridge in terms of free cash flow for the full fiscal, and you're right, the working capital is an investment for the full system. But we should not look at just the absolute value.

As you may have seen, our revenue has grown from about INR 87,000 crores last year towards 1.3 lakh crore, it is 1.5x. So the investment in the working capital, be it inventory or in terms of debtors, is all led by the pricing, the higher volume in the current fiscal.

If you look at the number of days outstanding, our working capital impact is lower than the last.

[ Not that. ] My question was more on receivables.

So if I look at cash flow, the receivables have gone up by INR 8,100 crores. But in balance sheet, trade receivables are up like INR 1,500-odd crores in current asset.

And in noncurrent asset, they are up like by -- hardly up. So I mean I can't reconcile the difference in receivables, INR 8,100 crores has gone up.

But trade receivable has gone up by only INR 1,500 crores. Just wanted to understand that what is the other component of those receivables.

It is multiple components, Amit. It is the normal creditors and including the [indiscernible].

What we can do, we can send you a breakup over the e-mail.

Sir, I have 2 questions. My first question relates to the Aluminum segment.

Now the company has laid out the 3 coal mines, Jamkhani and other 2, and the expectations of the mining commissioning. So my first question relates to coal is that can you give us a sense of what is the expected volumes from each of the mines?

And what would be the total all-in costs at these mines versus your current procurement of coal cost, adjusted for calorific values? I'm trying to understand what could be the potential savings from this capital coal mine.

We'll go about it. So we have 3 mines we have won through auction.

One is Jamkhani. Another is Radhikapur and Kuraloi.

So these are -- these mines are located within the stone's throw from our Gamsberg operation. So Jamkhani coal block, we are planning to make it operational next month.

This mine has a licensed capacity of 2.6 million tonnes per annum, but the potential is much larger. So once we start operation, and we would like to have a mine plan for a much larger value, much larger capacity, and my own sense is that this can go to 6 to 8 million tonnes per annum.

The current estimated cost from this mine is around INR 0.80 per GCV. So irrespective of GCV value, we convert it into the figure of paisa per GCV.

So this is INR 0.80 per GCV. The current cost has been wearing over the quarters.

The current cost is, say, INR 1.15 or so, which was the average for the last quarter. So I'm just mentioning this figure there for the comparison, and you can work out your numbers.

But the Radhikapur West, this mine has a capacity of 6 million tonnes per annum. So this mine, we want to make it operational in the second half of the year.

The potential cost per GCV could be -- as per our internal calculation, is INR 0.53 per GCV. And the third mine is Kuraloi North, which has a licensed capacity of 8 million tonnes.

And this also has a potential of around 8 million tonnes. So this will become operational by first half of FY '24.

So in the next 12 to 15 months' time, our belief is that all these 3 mines should become operational. With the current license capacity, it should produce around 17 million tonnes.

With the full potential, it can produce 50 -- 25 to 26 million tonnes. And the overall cost of all these 3 -- the average cost of all these 3 could be INR 0.57 to INR 0.60 against the last quarter call, which I mentioned was around INR 1.15.

Sir, my second question relates to Slide #48. Now Vedanta resources stand-alone, net debt stands as of March 31 at $8.9 billion.

Now given the dividend that the company has paid out and the cash flows that Vedanta Limited will generate, can we get a sense of how much the net debt at the parent unlisted entity is expected to reduce in the next financial year? The Chairman had talked about a number of $5 billion over 4 years, but can we break this down into the expected debt reduction over the next 12 months at the unlisted parent?

Sure, Pinakin. You may -- you're right, Page 48, it shows Vedanta Resources debt still is about $8.9 billion.

And today, also the Board announced its first interim dividend of almost $1.6 billion. And in that case, almost $1 billion becomes a receipt at [ VRL's ] hand.

These proceeds will be mostly used for [ part tendered for ] $1 billion bonds, which are due in July. Overall, what we committed a couple of months ago in our Mumbai [ EBIT ] is deleveraging Vedanta Resources of $4 billion over 3 years.

And we don't have breakup by year. But one thing I can commit to you, that the whole $4 billion over 3 years will not be back ended.

We'll front-end this. So at least $1 billion deleveraging in the current fiscal is our target.

I will add on a couple of sentences here. You see we have made an EBITDA of $6.3 billion last year.

So -- with a run rate of, say, $1.2 billion or $1.92 billion in quarter 4. So if you do your math and the commodity prices and the performance stays here, it has a potential of $8 billion.

With the efforts and the projects in the pipeline, which will integrate the operation, and you just heard about operationalization of the coal mines, and you also know that we are raising the capacity of our Lanjigarh operation from 2 million tonnes to 5 million tonnes. Here, even with the imported bauxite, it has a differential contribution of $150 per tonne.

But with the local bauxite, it has a potential of another $150 per tonne. With the power cost potential of, say, $300, $350 per tonne and this potential of $300 per tonne, the cost reduction, the integration of the operations, adding the value-added product capacity, increasing it from 44% to 90%, and the ESL capacity going up.

So we have the projects all over. I also talked about Zinc International, the potential that Zinc International has.

And I'm also very happy to report you that the SRK had just certified the report that we have added another $100 million -- 100 million tonnes of iron ore in our Zinc International operation. So we have a huge potential really -- looking at all the potential -- we capture the full potential.

I think the -- our revenues could be $30 billion to $35 billion in the next 2 years, and EBITDA could be $12 billion to $13 billion. With that EBITDA, and if you can look our CapEx and the other line items, it could deliver us a cash flow of $7 billion to $8 billion.

And with the debt of $9 billion and the cash flow of this, you can do your own math that where we can end.

Sir, my first question was with regards to the coal cost at Vedanta and if you [indiscernible]. And if you could highlight, what are the -- what is the breakup of your imported coal, e-auction coal and linkage coal.

So I gave you the overall cost of INR 1.15. The power cost in quarter 4 was [ $826 ] per tonne.

But if you want the overall breakup, I have my colleague, Rahul, around. In brief, if you can tell the breakup of the various sources of the coal procurement, which you have, and the overall breakup of the power cost.

Thanks, Mr. Duggal.

No -- but ideally, if you see that the last year, the total requirement was 22 million. And the percentage per se, linkage was 31% and e-auction was 63%.

And that's 5% to 6% more of [ aggregator. ] And total cost per GCV was INR 1, and we know that overall linkage cost is close to the INR 0.70 or INR 0.72.

And that's all you can wind out from the calculation what I said, you can calculate. And Q4 per se, [ INR 1.15, ] which Mr.

Duggal also said that. So that's the percentage breakup what I have said for the last year for 22 million, which we have consumed [indiscernible].

If you could just highlight on the Q4 because I believe Q4 was significantly different because the coal and the e-auction volumes were low, and the premiums were significantly higher. And how would you look for it for the next 2 quarters in terms of -- now -- coal might not have been able to -- allocate coal for the e-auctions and FSA is just not coming up to most of the aluminum values.

Yes. Basically, if you see that -- from a coal point of view, I think you must understand one, as I said, that I have 100% coal security.

And what movement has happened from Q3 to Q4 is that might transpire, which is my major quantity of 63%. That is around -- like INR 0.72, right?

And the balance is -- comes at -- e-auction was INR 1.19. And then if you have read out, it comes to -- [ entire is ] INR 1.18.

And I understand that today, the challenge is not the coal availability. Today is the challenge of materialization, and that's how that we are also faced some challenges, maybe -- and which we are overcoming by now, to convert from rail to RCR mode, rail to road.

And that's how we are managing, and that's how we are looking our coal materialization because security per se, we have 100% security -- rather, better security movement from the Q3 to Q4 because Q3 was 30% on linkage, which have moved to just double from the Q3 to Q4. Hope I have answered your question.

Yes. So basically, you've just said that -- if I understand this correctly, sir, you have mentioned that from Q3 to Q4, your FSA procurement has doubled from 31% to 63%, and e-auction is actually halved from 63% to 27%.

And your cost of production on equivalent basis for 4Q was INR 1.18 per GCV.

Yes. And if you see your overall costs for Q3 to Q4 was -- remained flat.

Flattish?

Yes.

Sir, second question was regarding...

I will add on. See, I mean you can see that the overall power cost has remained stable over quarter 3 and quarter 4.

And as Rahul said, actually, materialization is a key factor. And as we said that we have taken the option of road.

And we believe that the option of road, we'll be able to materialize it better because the distances are not very large from our operation. But apart from that, as I told you that the operationalization of the coal mines, so Jamkhani coal block getting operationalized just at the beginning of the next month itself.

So along with that, the -- if the pending rate -- the linkage rate materialization comes up, I think it will help us to conserve and bring down our cost in the coming quarters. So all efforts are in that direction.

And the cost -- power cost has picked up in the last quarter. So anything and everything which will happen, it will only reduce the cost from now on.

Yes. Sir, that is actually very great to hear about the -- how you have managed your power cost, and that was a big surprise as well.

Sir, my second question was with regards to the repayment schedule at the parent. You mentioned $1 billion is coming up for July, which has now already been arranged, and that's what we also anticipated.

Now if you could just highlight, what are the other -- what's the schedule of repayment at the promoter entities for the next 2 years?

Yes. Sure.

So if I give you a breakup of the current year. And in the current fiscal -- in the first half, almost $2 billion worth of loans or term loans are falling due for repayment.

Same way, the second half is almost $0.7 billion. So in the FY '23, the value is about $2.7 billion.

And in F '24, it's about $3 billion. So net-net, if you may have seen, as I mentioned, almost $1 billion, if not more, we will repay using our free cash flows.

Balance will be a mix of repayment or refinancing without current profitability, which will lead to again robust free cash flows. And secondly, the current structure, which is 70% holding of Vedanta Resources into Vedanta Limited, we feel that in terms of refinancing or repayment, we are quite comfortable.

A couple of questions. Sir, first on the ESG side, you have indicated in the presentation on the PDA as well as substitution of natural gas.

Would it be possible for you to explain the underlying economics and how it will actually help us versus the current sourcing on energy that we have?

Yes. So we have done the PDA for 580 megawatts, which is 200 megawatts of BALCO, 200 megawatts of zinc and 180 megawatts of Jharsuguda.

So the PDAs, which have been done, the -- today's cost at Hindustan Zinc is around INR 5.50 also current cost, against which the PDAs are at a much lesser cost. Similarly, at BALCO and Jharsuguda, we will get a benefit of, say, 20%, 25% from the current marginal cost.

And this project has overall IRR of more than 25%.

Okay. Sir, if I have to simplistically look at it from a rupees per kilowatt hour basis, what should one look at that particular number corresponding to this 580 megawatts on some total [indiscernible]?

So roughly, the average for 580 megawatts is around INR 4 per unit.

Okay. That's helpful.

And sir, second on the gas side, wherein we have indicated partnership deal, how should one look at the volume and the economics over here?

So this is at a prefeasibility stage. They have to connect the pipeline from -- the GAIL pipeline to our complex.

That will also need CapEx. So we are looking at the feasibility and the overall economics.

But definitely, it is going to be cheaper than what we are doing today. The similar project we did for Hindustan Zinc for our smelting complex at Chanderiya and we also did for our [indiscernible] operation.

And there, we got cost benefit of, say, 30%, 40% at that time. And we believe that similar benefits should come here.

Sir, my second question is on the Hindustan Zinc call, we had indicated that we have taken hedges on zinc. Sir, what was the thought process behind that?

And if you have done on zinc, why not for other commodities, which will actually give us safety on cash flows on forward basis?

No, it is a very conscious call we have taken. We wanted to secure our business plan.

And when the future predictions, we looked at and our own strategic team deliberated and a part of the production we have hedged for the next few months. So the overall, I think -- anything, Ajay, you want to add on this?

Yes. I'd like to supplement a couple of areas.

You're right, traditionally, Vedanta's philosophy has been to capture the average LME or the average of Brent for the month of production, and we have not been hedging strategically. But as you would appreciate, given the current environment is quite volatile, very tumultuous and even the pricing is quite lofty, we want to capture the benefit in our income statement.

So using that route, we have made this time a course correction. And across 3 key commodities, which is zinc, aluminum and oil and gas, oil specifically, we have hedged about 15% of the volume for the current fiscal, and that will secure our profitability for next 3, 4 months.

Sir, you indicated oil, we have hedged at 15% of the total volume?

Yes. Across zinc, aluminum and oil, give and take, 15% on average.

The business plan volume for the current fiscal has been hedged.

Sir, can you indicate the pricing given this is quite critical and that's a great step actually what the company has taken?

I can give you ballpark number. Zinc, for example, is more than of [ $4,100 ] per tonne.

Aluminum is about $3,600 per tonne, and oil at about $100 per Brent.

[indiscernible]

Sir, firstly, on the -- you gave detail about the coal sourcing. So how should we read it?

So in the next 2 quarters, are we going to see costs remaining where they were in the fourth quarter or because e-auction are still high? And so how should we read on the cost front?

See, the market is very volatile. You see -- I mean, the -- you know everything what is happening in the market.

So the market is very volatile, but we are doing what we can do. So we have Tranche 5, which gives us a security of 1 to 1.1 million tonne of coal through the Tranche 5.

And this will have a cost -- a laggard cost of, say, INR 0.75, INR 0.78 per GCV, depending on the more we transport and land at our operation. But as we explained earlier, we have taken a call where we have decided that we will transport the coal through road if the rail availability is becoming a constraint.

And with that belief, we believe that the materialization of the Tranche 5 coal could become better. With this, 60%, 70% of the security could be provided.

And then as I said that we are operationalizing the Jamkhani coal block and -- which also has -- which will deliver coal to us at around INR 0.80, INR 0.82 per GCV. And with these 2 combinations, if we are able to do -- and whatever we have done in the quarter 3 and quarter 4 last year, I believe that anything which has happened in quarter 3, quarter 4 have picked up.

And from now on, with these initiatives, the coal cost should become better from now on.

Right, right. So that was helpful.

And then, sir, going forward, so if I see your CapEx plan and the guidance on volumes that you have provided, so we haven't really done much on Zinc International where we have such robust plans. And so are we going to kick-start these projects?

And similarly, for oil also, so even for the guidance for this year seems to be quite off. So I'm just wondering, when are you going to work on these 2?

Or we are just focused on -- more on cash generation rather than doing more CapEx?

So on Zinc International, you know that we set up this project with the designed volume delivery of, say, 200 ktpa. This was the Anglo -- the zinc assets from whom we acquired.

They did not put up the project last many, many years, or 3 years, but we took a call to put up this project, partnered with the global technology supplier like [indiscernible] and all that and designed this project. So it had certain impurities like manganese, and mineralogy was such that it was difficult to float.

But over the 3 years, we have mastered the art of floating this. We have done a lot of modification in the plant, like the flotation circuit, putting up [indiscernible] for cleaner filters and all of the things what we wanted to do.

And as we said that the success now in the month of March, April in the last quarter is such that this crossing now the designed capacity. It has given us a full confidence.

With that confidence, we have designed another circuit, which is a parallel circuit, incorporating all those learnings which we got from first phase, and even building up the capacity better than that. My sense is that the full potential from both these lines could be 600 ktpa.

And if that be the case, we could be making it as one of the biggest complex in the world. And we have also decided that with this success coming up, we may look at putting on the smelting capacity here.

But now we have already ordered the second phase of the project at a CapEx of $450 million. A part of it will come in the cash flow.

This will have a time line of 16 to 18 months from now. We -- the kickoff has already taken place, and the groundbreaking work is about to start.

You're saying in '25, we will have 600 kt, is that right to look at it that way in FY '25?

See, the second phase will get commissioned in FY '24. And if we take the coal to put up a smelter in the next few months, we believe that we deserve to put up the smelter there.

So with 600 kt, and we also have the Black Mountain mine there. We are -- also, we are doing some debottlenecking.

And the capacity may go up to 100 ktpa. But the full capacity of 600 to 700 ktpa, this complex can get fully integrated into a finished metal of 600 ktpa capacity.

We are on drying board. We will come back and report to you as we will progress, but that is our vision.

And our belief is that we should be able to convert this complex to this size.

Right. And sir, about oil and gas?

Yes. So oil and gas, my colleague is there, he will tell you.

But basically, apart from addressing the infill drilling, doing some target exploration and ordering ASP, which is an enhanced oil recovery program in our NBSX, and doing the pilot on shale oil, these are the 4 major areas. But Prachur, you should -- you may both give a little more detail and more color on this.

Sure. Thank you, Duggal.

I think you covered most of it. I think -- so the growth for oil are broken up into 2.

One is the infill drilling, as Duggal, you mentioned, which is currently going to cater to manage the natural decline. So whatever natural decline is there, we manage through the infill projects.

The 3 growth projects that is going to add the results in subsequent production is the enhanced recovery in our MBA fields, which is supposed to be adding about 200 million barrels overall when successful. And then we are going to do our shale project probably starting in June or July.

And then third will be the exploration across the different acreages in our existing blocks and our new blocks. And combined these 3 projects with the gestation period about 1.5, 2 years, we should see the volumes coming through.

So is there any CapEx number for this year in the Oil & Gas business? Or it's still like...

Yes.

What is the number?

The CapEx number for this year is $687 million, if I'm not wrong, out of which, [ 15% ], close to [ 50% ] is in the infill projects, managing natural decline, and the remaining is on the 3 growth projects that I mentioned. [ Correct ] -- I think my number is right, Ajay, [ isn't it?

$687 million? ]

That's right, Prachur.

But cash flow could be a part of it.

Congratulations on the record numbers. Two questions, one on the aluminum expansion to 3 million, at what stage are we in terms of all the approvals on the environment side and all the other approvals?

And how much is the order?

So on 3 million tonne, you may know that we have ramped up almost all ports at Jharsuguda. And the balance ports are going to be online this quarter.

Apart from that, the expansion of 0.4 million tonne at our BALCO complex. We have -- the proposal by [ ESC ] has been cleared.

We may get [ ECNE ] at any point of time. In the meantime, ordering and the [ patterning ] is being finalized.

And we will put the shovel on the ground soon. Anything, Rahul, you want to add?

No. Just to add that like -- whether we talk about our Lanjigarh and BALCO, we have got all the [ ESC ] in hand.

So all approvals are in hand. BALCO, so we have bought recently and [indiscernible].

So that's not the point -- issue on that table. A client coming from the expansion as almost 75% order is already in place.

And this -- all the project is in full swing, and we see that momentum in terms of the project progress. And we have given the time line also when we are planning to have BALCO expansion and Lanjigarh, which is already part of our presentation.

And sir, last question, the [ whole thing, ] which you mentioned, that 15.3 million you have won in Tranche 5, have you started receiving coal from this Tranche 5?

Yes.

Yes. Yes.

We have been receiving coal from the Tranche 5. Materialization was not so good.

But now the materialization has improved. And now with this decision taken, I think we should be able to get almost full quantity.

This is cumulative 15.3 million you get over 5 years, right?

No, no. Every year is 15 million against the requirement of 22 million.

Every year.

So around 1.1, 1.2 million tonne per month.

Per month. So you have been getting that kind of quantity?

Because coal -- India has been reducing quantities to the nonpower sector. So how much was based on that front?

And if I believe that -- normally, what it is that it gets carried forward where they don't supply it. So can you update on that?

See, the quantity has been going up. We have got around 2 together.

The volume has not been so good. But in the month of March, we got good quantity, say, around 0.5 million tonne plus we got.

So the quantity has not been so bad. Of late, it has been ramping up.

So with this decision taken, I think and we believe that we should be able to get almost the full quantity.

Congratulations on a good set of numbers. I had a quick question on -- sir, on the holding company level.

Sir, could you just let us know what the current cash is at the holding company level? And is this inclusive of the dividend that was paid that was sort of announced in March?

And the second question is, sir, what -- do you have any update on -- you mentioned that you will be doing a mix of refinancing and repayment of the loans at the holding company. Do you have any update for us on any refinancing that's occurred at the holding company?

Any debt that's been pushed back or refinanced or new maturity?

Sir, I partly answered that maybe in the call previously. And our overall intent is about deleveraging at least $1 billion every fiscal and overall $4 billion over 3 years.

And that is all using our organic free cash flows. In terms of maturities, we got a page in our deck.

I'll just request that we'll limit this call's questions mostly on Vedanta Limited. We'll have another call for Vedanta Resources once we are done with the Vedanta financials.

And we can cover Vedanta Resources more in detail in that call, please. Thank you.

Thank you, Stanford. Thank you all for taking the time to join us this evening.

I hope we were able to answer most of your questions. If you have any further questions, please feel free to reach either me or the rest of the Investor Relations team.

This concludes today's call. We look forward to reconnect with you for next quarter earnings call.

Thank you.