Vedanta Ltd

NSE:VEDL

Q1-2026 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to the Vedanta Limited Q1 First Quarter Financial Year 25/26 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. [Operator Instructions]

I now hand the conference over to Mr. Charanjit Singh Group Head, Investor Vedanta. Thank you, and over to you, sir.

[Charanjit Singh, executive]

Thank you, Sagar. Good evening, everyone, and welcome to Vedanta Limited Q1 FY '26 Earnings Call. On behalf of Team Vedanta, I thank you all for joining us today. I hope you had the chance to look at the press release earnings presentation and detailed financial statements uploaded on the website of stock exchanges and the company website. On this call, I have with me our Group CEO, Ms. Deshnee Naidoo; Mr. Arun Mishra, our Executive Director; Mr. Ajay Goel, our Group CFO; Mr. Rajeev Kumar, CEO, aluminum business; Mr. Anup Agarwal, CFO, Aluminum business; and Mr. Hitesh Vaid, CFO, Oil and Gas business.

We will begin with an operational and strategic update by Ms. Naidu, followed by financial highlights by Mr. Ajay Agarwal. Thereafter, we will open the lines for Q&A. The call is covered by the cautionary statement provided in the results presentation.

With this, I now hand over the call to Ms. Naidu, over to Deshnee.

[Deshnee Naidoo, executive]

Thank you so much, Charanjit. Good evening, everyone. It is a pleasure to address you all as we mark the close of the first quarter FY '26. We began the financial year at global uncertainty resulting from the implementation of the U.S. announced tariffs. Early April, we witnessed a sharp decline in the prices of key commodities, particularly the ones relevant to us, aluminum, zinc, iron and steel and oil and gas. Despite this backdrop, we delivered our strongest first quarter performance ever, setting a strong foundation for the year. During our last interaction in April, I spoke about a new chapter in Vedanta's journey, Vedanta 2.0 a forward-looking value-driven road map designed to reinforce our leadership across critical minerals, energy and technology, while ensuring sustainable long-term growth for all stakeholders.

This progress made on this front includes the NCLT initiated hearing on the second motion petition for demerger, the NCLT bench held their first hearing on July 2, given the paucity of time, the process could not be completed and the next hearing is scheduled for August 20. This will take us a step closer to the final order, augmentation of our strategic investment plan.

In the first quarter, Hindustan Zinc's Board approved the first phase of its expansion towards 2 million tonne capacity. This phase will add 250,000 tonnes of capacity and is backed by a $1.4 billion investment, thereby announcing our total capacity or total capital investment plan from $9.5 billion to $11 billion. of which $5.9 billion has already been spent as at June 2025. We secured 2 additional mining blocks of high-value critical minerals thereby taking the total count of blocks assigned to 10 since the launch of India's critical minerals mission. These blocks are for nickel, premium, cobalt, vanadium, manganese, tungsten, gold and rare earth elements. Now we know that this journey on the Vivanta 2.0 roadmap isn't going to be without its challenges. But given our robust business model, strong governance framework and transparent disclosures, we see ourselves well positioned to address any challenges that may come our way.

Being a listed company, we are always open to market scrutiny. However, it is also our responsibility to call out any false narrative targeting us, guided by vested interest, such as the recent malicious propaganda by a short seller with an ulterior motive of profit booking at the cost of our long-term investors. I appreciate the wisdom of our key stakeholders who despite the repeated attempts from the short seller to create panic among them have remained unseated. As you might be aware, we sought legal advice on the matter from the Chief Justice of India, and his opinion is now shared publicly. Now turning to our operational performance for the quarter. Vedanta has posted a robust performance despite a softer pricing environment. Revenue and EBITDA grew by 5% and 6% year-on-year, driven by stronger domestic demand. The EBITDA margin expanded by 81 basis points year-on-year to 35%, the highest in the last 13 quarters. ROCE improved to 25%, up 87 basis points year-on-year, enabled by record volumes across key segments and improved margins given the rigorous cost discipline. Let me now walk you through the various business segments. Starting with aluminum. We achieved a record quarterly alumina production of 587,000 tons, up 9% year-on-year demonstrating progress towards delivering a guided volume of over 3 million tons in the current financial year. Our metal production reached 605,000 tonnes, and we recorded the lowest hot metal cost ex alumina in the last 16 quarters at $888 per tonne.

This is driven by the lowest ever power cost at $491 per ton, supported by a record PLF of 89% at our captive facilities. These costs are sustainable over the coming quarters except quarter 2, given the planned maintenance of power generation facilities during the quarter. Our Zinc India operations delivered its highest ever quarter mined metal production of 265,000 tonnes and the lowest ever first quarter cost at $1,010 per tonne. The share of value-added products reached 24%, demonstrating progress towards our strategic value-added plan, shifting focus to our international operations. Zinc International delivered a strong performance at Gamsberg production surged 74% year-on-year, backed by strong ore availability and mining ramp-up. Our oil and gas business faced a natural decline in the MBA fields. However, this was partially offset by the infill wells in Asaria, ABH and satellite fuels, particularly in the last 2 months of the quarter. Over the quarter, we reported an average daily volume of 92,000 of 92,000 barrels per day and managed to reduce the OpEx by 11% quarter-on-quarter through optimized polymer and chemical use. Our power business recorded a robust 30.8% quarter-on-quarter volume growth. supported by the start of the 300-megawatt capacity at Minakshi power plant and 90% availability at TSPL.

In iron ore, we scaled up volumes at our Karnataka mine to the highest ever 1.7 wet metric tons, while our value-added business in Goa delivered its highest ever first quarter pig iron production of 213,000 tons, operational enhancements like the new PCI MO and the Coke drying system are setting us up for sustained efficiency. At ESL, we saw a marginal drop in production due to the [indiscernible] maintenance, which was offset by the increase in our INR output to 0.9 million tonnes. Margins at mines fell strong, improving by 11% quarter-on-quarter to $49 per ton.

Finally, our [indiscernible] business delivered an exceptional growth with ore production rising by 66% quarter-on-quarter and ferrochrome output by 150% quarter-on-quarter with the restart of the second furnace. At Vedanta, we are proud of delivering responsible growth. We focus on all our stakeholders. In the first quarter, we reported 0 workplace fatalities. We are making steady progress towards our climate goals and have already signed a total renewable power delivery agreement of 1,900 megawatts. During the quarter, we impacted just over 2 million lives through initiatives in maternal health, nutrition, education and skilling.

Our flagship [indiscernible] program with over 8,600 centers across India is now transforming the lives of over 600,000 people. Looking ahead, our volume growth and margin expansion story will continue across all businesses. In aluminum, the commissioning of [indiscernible] Train 2 and the 435,000 tonnes per annum bulk ore smelter is targeted in the current quarter. The average alumina cost per tonne is likely to decline further with a full reflection of our lower market prices and increased share of captive production.

At Hindustan Zinc, we are targeting the commissioning of 160,000 tonnes per annum roaster at Debari and in the current quarter, thereby making us ready for the 1.2-plus million tonnes per annum refined metal production. Our Zinc International business is on course to complete the Gamsberg Phase 2 project in the second half of the current financial year, thereby increasing operational mine capacity of Zinc International to 525,000 tonnes per annum. In oil and gas, the current quarter is going to be action driven. We are set to begin ASP injection commenced drilling on the West Coast and launch exploration in the unconventional blocks. Additionally, we are evaluating drilling plans for deepwater exploration in KG Basin. Our power business is set to add another 1,300 megawatts of new capacity in the second quarter. In July, we commissioned the 350-megawatt at Minakshi [indiscernible] Unit 3 and the 600 megawatts at Athena unit an additional 350 megawatts at Minakshi Unit 4 is planned for commissioning in August, while Athena Unit 2 with a capacity of 600 megawatts is scheduled for commissioning in quarter 4 in the current financial year. I would like to conclude by stating that despite the uncertain macro environment, our first quarter performance has set us on track to achieve our FY '26 guidance. At current commodity prices, we are well positioned to deliver our best performance. We are confident of creating sustainable long-term value to all stakeholders, while progressing our journey on the Vedanta 2.0 road map. Thank you, Ajay.

[Ajay Goel, executive]

Thank you, Deshnee. Good evening, everyone. Complex and evolving macroeconomic environment. The first quarter was defined and recalibrating global landscape, driven by evolving trade dynamics and geopolitical realignments. LME prices remain subdued, with most key commodities, barring silver, witnessing Y-o-Y declines. Despite these headwinds, I'm pleased to report that we have delivered our highest ever first quarter EBITDA of INR 10,046 crores, along with an 81 basis point Y-o-Y improvement in margins. .

This robust performance reflects the strength of our portfolio and was enabled by rigorous cost reductions through operational efficiencies, stronger market premiums supported by healthy domestic demand. and next available ForEx and other strategic levers. Our key businesses continued to demonstrate exceptional margin resilience, aluminum at 31%; Hindustan Zinc at 51% and [indiscernible] at 55%. Hindustan Zinc achieved its lowest ever first quarter cost of production, while aluminum reduced its spot metal cost down by 12% quarter-on-quarter, both remarkable operational milestones. Financial performance highlights. Let me now walk you through our Q1 financial results, which reflect the strength and consistency of our operations. Control revenue at INR 7,404 crores, registering a solid 6% growth Y-o-Y.

EBITDA came in at INR 10,746 crores, our highest ever for the first quarter, marking a 5% increase Y-o-Y. EBITDA margin expanded to 35%, the highest in the past 13 quarters. a clear indicator of operational excellence and cost discipline. Adjusted PAT rose to INR 5,000 crores, a strong 13% growth Y-o-Y, while reported PAT stood at after factoring in certain one-off items. Our OCE improved by 87 basis points of Y-o-Y sustaining our double-digit turns profile and reinforcing our focus on capital efficiency. With a strong start of the current year, we are well positioned to sustain momentum as we execute our strategic priorities. Now turning to the balance sheet. We continue to operate from a position of strength and discipline. So as of June 2025, our net debt stood at INR 58, 220 crores, representing a decline of INR 3,000 crores Y-o-Y, supported by strong internal accruals and targeted capital actions. The net debt-to-EBITDA ratio improved to 1.3x from 1.5x last year, reflecting improved cash flow generation and capital management efficiency. We ended the quarter with a healthy liquidity of INR 2,137 crores a 33% Y-o-Y and 7% quarter-on-quarter increase providing us with ample headroom for investment and contingencies. Finally, staying true to our shareholder commitment, we declared a dividend of INR 7 per share during the quarter.

Moving on to capital actions and deleveraging. In line with our capital disciplined agenda, we took several initiatives in the quarter, further standing our capital structure. -- we monetized 1.6% stick, Hindustan Zinc raising more than INR 3,000 crores in Q1. We also raised INR 5,000 via and other loans at more favorable terms, a testament to the market's confidence in our case strength. These initiatives has contributed to a 130 basis point improvement Y-o-Y in our borrowing cost now reduced down to 9.2%. Together, these actions enhance financial agility, further our journey towards a leaner capital structure.

Demerger update. Let me now update you on the progress of demerger. Deshnee, though briefly covered that. The second motion petition has been formally submitted to NCLT. And the next hearing is scheduled on 20th August, after part heading on second July. Separately, the class has granted an interim stay on TSPL, our power demerger order by NCLT with the next hearing scheduled on August 4. We remain confident of a positive outcome in both forums, and we continue to progress in line with our previously shared time lines. The execution of the demerger remains a top priority for Vedanta.

On credit ratings, both Crisil and [indiscernible] have reaffirmed Vedanta's ratings at AA, reflecting strong institutional competence in our governance practices, financial strength and the long-term strategic outlook. In conclusion, to sum of Q1 has been a quarter of strength, discipline and strategic delivery. We delivered a record first quarter EBITDA, executed critical capital and deleveraging actions, sustained robust margins in the key businesses announced much anticipated 2x growth project for Zinc India. And in July, we commissioned 950 megawatts of merchant power capacity at Minakshi and Athena, both of which are now fully operational. As we look ahead, we continue to operate with clarity and conviction undeterred by excel attempt to shift the narrative. Together, we are building a stronger futurity with Ant Vedanta 2.0. Thank you. Now over to operator for Q&A.

[Operator]

[Operator Instructions] Our first question comes from the line of Amit Lahoti from Emkay Global.

[Amit Lahoti, analyst]

My first question is on aluminum hot metal cost, which has declined in Q1. So what are the drivers view in terms of power and other stuff? And can we expect more savings in the coming quarters?

[Deshnee Naidoo, executive]

Thank you, Amit. I will start and then hand over to Anup. So we delivered, as we mentioned, the COP of $17.65 per tonne in quarter 1, and that was a reduction of $247 per tonne. So that 12% quarter-on-quarter. This is largely on account of the softer alumina market prices as well as the increase in captive mix, as we indicated, with the [indiscernible] increase volumes. So in quarter 2, we're likely to see a marginal cost reduction that I've also indicated, although we have better reception of the lower aluminum prices, will be balanced by higher power costs due to the planned maintenance activities we have at our plants in Jaguar in particular. In the second half of the year, we do expect cost to be around the lower end of the already guided range. I'll hand over to you, Anup to talk about some of the specifics we are doing in terms of cost reduction and containment across aluminum.

[Anup Agarwal, executive]

Thank you, Deshnee, and I may call see in H2 with the train to [indiscernible] commissioning, we will have improved captive mix. So that will take us our mix, which is at predate 50% to somewhere around 65% to 70%. Point number one. Point number two, you would have seen last few quarters, the work that has happened on the power and the coal front. And Deshnee covered it, but for some planned maintenance, which was by design plan to set up for the H2, we are now close below $500. So with the improved [indiscernible], the Luna cost below 800, the power cost somewhere around 500, you can see we are now set for the part metal cost sub 1,700 as we go into the H2. And if you recall in our guidance also in the year beginning, we had said that the hot metal cost for the year will be in the range of INR 1,700 crores to INR 1,750 crores. In Q1, we have done close to INR 1,765 quarter 2 test already alluded that because of the planned shutdown, we will be slightly higher or margin or flatish. But for the H2, we expect a very, very strong cost. And we will look at the RAB today and giving the Bs that we are having -- you can see that at today's probably we will have a margin of $1,100 or so actually go into the H2.

So Amit, hopefully, I have answered your question.

[Amit Lahoti, analyst]

So just to follow up on this, specifically for alumina cost. As you mentioned in your opening all could you quantify cost reduction that could come on from lower alumina prices and second cost reduction at [indiscernible] because it has gone up in the recent quarters to $373, $380. So can we see some reduction there as well at [indiscernible]

[Anup Agarwal, executive]

So yes. So on can see next 2 quarters. We expect a cost reduction of closer to $80 to $100. And you can assume that 60% of it is going to come through the captive [indiscernible] outside. And the balance is, of course, going to come from the open market prices. .

[Amit Lahoti, analyst]

Okay. And lastly, if you could provide commissioning time lines for [indiscernible] mine as well as the coal mining.

[Charanjit Singh, executive]

Thank you, Amit. Maybe I will start and then hand over to Rajiv. So on CG Mali, we are targeting the EC by the end of this quarter. which means probably a start of production at the end of quarter 4. In terms of overall bauxite mix, we are still factoring as we've indicated previously, about 1 million to 1.5 million tonnes of Boxer from [indiscernible] this year still. I'll hand over to you, Rajeev to talk more and also the questions around coal mining timing.

[Unknown Executive]

Thank you, Deshnee. Thank you, Amit. On [indiscernible] Mali, we are going to get the FC1 clearance of the start and then followed by EC clearances followed by FC2 clearances. So that's the process of clearances. The we see there happened yesterday, and we have to get the communication in the next few days. Hopefully, we are going to get the approvals. And then from there, I think, as Deshnee said, in the next 3 to 4 months, we should be over with all the approvals and then we can start to go on to the mine. As far as Copel is concerned, Olo, we have an implicipal approval for FCI. And just a few days back, we got a grant for the EC as well is also being targeted by the end of the quarter. And as is the guidance in the last quarter, in quarter 3, we should be up we should be ready to start fully. So that's the guidance, and we stick to the guidance. As far as Bogaaris concerned, the mining plan has been approved. The to has been integrated. A few days back, we got 300 acres which is about 41% of the government land. And we are targeting the FC1 and DC by the quarter 4 of this year. I hope I have answered you, Amit related to the progress of CD [indiscernible] for [indiscernible]

[Operator]

Our next question comes from the line of Ankit [indiscernible] from SBI General Insurance. .

[Unknown Analyst]

I just wanted to know whether the [indiscernible] issues resolved If not, what is your bauxite sourcing fund?

[Charanjit Singh, executive]

Thank you for that. I think I will hand over to Anup on the question. But if I understood you well, you're asking us about EGA, right? So EGA's operations in Guinea and suspended. There's no bauxite supplies from EGA, [indiscernible]. I think maybe before I hand over to Anoto add anything further, I just wanted to maybe put the context around what is happening on -- from an overall bauxite and alumina point of view for the business. So as we guided, we are targeting 3 million to 3.1 million tonnes of alumina production for the year. And you all would have seen that we've had a good start at [indiscernible] in terms of 58,000 tonnes in the first quarter which actually puts us in a very good position to meet that number. So roughly, we need just over 9 million tonnes of bauxite for the year. Around 5 million tonnes of that is coming from OMC and other domestic sources. 2.5 million tonnes from import. And as Rajiv has just guided another 1 million to 1.5 million tonnes from CG Malik. So we are fully tied up for our bauxite commitments for the full year. I think I can leave it there. Anup.

[Anup Agarwal, executive]

I don't have anything to add.

[Operator]

Our next question comes from the line of Aditya Welekar from Axis Securities.

[Aditya Welekar, analyst]

Sir, our guidance on oil and gas is between 95 to 100 [indiscernible]. And in Q1, we have seen a 7% decline. So in that context in the earlier call, we have said that we will see the oil and gas volume will have an upward trajectory from Q2 onwards. So are we on track for that? And given our efforts on exploration side, so if you can throw some guidance for -- in the medium term. So how those volumes will ramp up and how we will arrest the decline. So that's number one.

[Charanjit Singh, executive]

Thank you, Aditya. I will start and then hand over to Ritesh, our CFO from [indiscernible] on the line. So as you're right, we said FY '26, we are targeting a range of 95,000 to 100,000 barrels of oil equivalent per day. And just to remind everyone that we came very close to the guidance of last year as well. So there's maybe 3 things I want to mention before I hand over to Hiper to talk about the specifics. So we want to manage the decline by about 15% from FY '25 levels. There are 3 areas that we are targeting. The new wells that we drilled in FY '25 will give us about 8,000 barrels of oil equivalent per day. There's additional wells planned for this year that are already starting to give us an uplift in barrels, and that's about 5,000 barrels of oil equivalent per day. In addition, and I really want Its to talk a lot about the ASP projects. So we've been talking about ASP.

We are now -- we have started ASP injection in the Castel well pad in Mangala and that's not targeted for August and September. So 3 things are happening. This is a decline that we've planned for. We have wells from last year that are giving us a delta of about 8,000. We have wells being drilled this year, 5,000, and we have our ASP project. So maybe IPs, you can talk a little bit about the specifics as well as an answer the questions around further exploration and development projects that we are busy with.

[Unknown Executive]

I think in terms of traction, as Disney said, we delivered 93,000 barrels per day for Q1. And if you look at over the last 6 months, we have managed to contain our decline. The rates are now around 3% to 4% quarter-on-quarter. One of the -- or a couple of activities, which have added in helping us to manage decline is continuously being [indiscernible] in profit Rajasthan fees as well as well intervention, which we have done to recover volumes around wells which have gone down. Now in addition, what we've also done is, during this course of time, we have managed to optimize our OpEx, which for the quarter was 15.1%, which is substantially lower compared to previous quarters. This has been done in vision as well as chemicals in an efficient way.

Now for the full year, as you rightly said, our guidance is for 95 to 1,000 barrels per day. Now the key levers will be to continue to infill wells in Rajasthan, which approximately will give us around 5,000 barrels per day. The other part is ASP, which Deshnee spoke about. Now ASP project, we are set for injection in selective easing in the mandate. So in a couple of months, we will start injecting volumes on those films in around 6 months' time. we expect volume gain. And once we are through with the full field injection, probably in 3 to 4 quarters, we expect the additional gain of around 15,000 barrels per day from ASP injection in select among Mangla Fees. Now beyond ASP, looking into the future as well, especially from a volume point of view, we are also starting appraisal and development of a BSF field, which is [indiscernible], is on the West Coast. Now the drilling in that field will start in October this year, and that is going to add around 18,000 barrels of oil equivalent in around 1.5 years' time. Now what we will also be able to achieve this year is on our OpEx, which is need to be around $15 to $16 per barrel. Looking at long term and especially on the exploration side, what we have started currently is drilling in Rajasthan, which has been our most prolific fee. So we are routing an international and targeting deeper prospects, tighter prospects. And we intend to bring 3 to 6 wells. The well is already set apple of this bank. In the west cost [indiscernible] basin, we also have our OLP block, where we will spud in September 2025. There has been portend it is in the process of being mobilized. In the Northeast, a couple of quarters back, we had a discovery [indiscernible]. So we are now set for appraisal of their discovery. So in the next 2 months, we will -- we're trying to spend 2 to 3 ways to figure out the potential of pros as well as we've got a few more opportunities in Northeast, which we will bring around Q3, Q4 of this year.

And beyond this in exploration, 1 of the larger play in our books is a deep quarter where we recently acquired CCM data. Now the data has given us some very positive indication on the potential and we intend to target 3 wells early next year. So this is on the overall exploration plan. .

[Aditya Welekar, analyst]

My second question is on power division. So we have seen a good jump in this quarter. And if I can see for Minakshi, the power realizations have stood at a very high level of INR 7.2 per kilowatt hour. So just wanted to understand on Minakshi and Athena, what is the split between power purchase agreements and spot merchant sales because in Q1, we have seen that merchant tariffs have come down in the range of INR 3 to INR 4 per kilowatt hour. And in that context, I mean, actual realization is quite high. So if you can throw some light on that.

[Charanjit Singh, executive]

Thank you, Aditya. Maybe just to recap, right? So Aditya, on Minakshi, present, we have the 350 megawatts. And as we've said, that we will -- we've added another 350 megawatts. So [indiscernible] by the end of this quarter, the end of quarter 2, we'll have the full 1,000 megawatts power there. And then Athena as we've guided, we've only commissioned the 600 megawatts. The remaining 600 megawatts will come at the end. So back to maybe performance and your point, quarter 1 performance, 300 megawatts of Minakshi capacity was operating. And the average generation cost was around INR 6 per unit and selling price was around INR 7 per unit. So from quarter 2 onwards, right? Minakshi operating capacity, as I said, 1,000 megawatts, estimated PLF around 50%. Cost is INR 5 per unit and selling price will be between INR 550 to INR 570 per unit. On Athena 600 megawatts PLF will ramp up from 60% to around 80% in the year. And the cost is about INR 3.6 per unit and selling price at INR 5 per unit. So short-term PPAs are in place for the power sale.

[Aditya Welekar, analyst]

Understood. So any percentage between short-term PPA and spot sales for both these plants.

[Unknown Executive]

It's all short-term PPAs at this moment, and they are trying to stabilize the plant at this point in time. And over a period of time, we will also enter into a lot which will be followed also by FSC. .

[Operator]

Our next question comes from the line of Pallav Agarwal from Andy Stock Broking.

[Pallav Agarwal, analyst]

So my first question was on some of the media reports stating that the Ministry of Petroleum had objections to the demerger. So what do any -- what are the downs in which the Ministry of Petroleum had certain objections. If you could specify that?

[Charanjit Singh, executive]

Thank you for that. I think we -- firstly, we did give quite a detailed account of where we are in the overall demerger approval with reference to MOP. And firstly, they are key stakeholders for us in the -- in our oil and gas business. And in the last NCLT, they did express concern about the payments of any of the disputed dues that may become payable by -- can in case the ongoing arbitration ruling, as we've all learned, comes in their favor. So we are working with them as we do with all key stakeholders, and we are confident that we will come to a solution at the earliest possible time.

[Pallav Agarwal, analyst]

Okay. Also, we had plans for expanding the aluminum capacity, I think, to 3.1 million tonnes and even the alumina debottlenecking, if I remember correct, 6 million tonnes. So any time lines on that? Or what part of those projects would be commissioned in FY '26 and '27?

[Charanjit Singh, executive]

Yes. So for now, these are debottlenecking exercises. As you know, the current capacity expansion volume-wise will take us to around 2.8 million mark. And then in terms -- and that's -- and then in terms of the overall expansion from 5 to 6 million tonnes per annum, I'll let Rajiv talk us thought it. In terms of when that capacity will likely be brought in line, we are forecasting maybe the back end of FY '27. But Rajiv, maybe you just want to add in terms of the work underway to reach those capacities.

[Unknown Executive]

So thank you, Dan. You have summed it up nicely. The time line should be 18 months that we are looking at. It is -- how do you increase the volume? It is done by improving the current carrying capacity of the ports. And we are looking at enhanced technology. It's called magnetic compensation root. We are working on that technology to improve the capacity, but it will take about 18 months. First thing first, we have to achieve whatever we have planned for, and that's where the focus is to reach to 2.8 million to 2.85 million tonnes at both the places at [indiscernible] as well as a and then [indiscernible]. And then take it on as far as the smelters are concerned. As far as [indiscernible] is concerned, we have with us put out to reach 5 million and on the 5 million tonnes is achieved, then we will look at rebottle in the capacities, which we already have like from logistics to evacuation to also talk about board infrastructure. So it will be through and too as well as what we are doing in Banziger is to improve the -- how to milk the assets that we have. And I think -- that's the way to go about as far as we are concerned.

[Charanjit Singh, executive]

Thank you for that, Rajeev. And [indiscernible] just to be clear, you also asked for some of the other project expansions or just aluminum?

[Pallav Agarwal, analyst]

Yes, having some of them you delivered the mining projects that you've outlined.

[Charanjit Singh, executive]

All right. Excellent. I think what I will do there is actually ask Arun Mishra to talk about the Hindustan Zinc expansions. Zinc, we are going for a 2 million tonne expansion, of which as you have reported after the last board meeting, INR 12,000 crore board approval that we have announced, which will add a capacity of 0.25 million tonnes. And now it will be followed up by further announcements until about September, so that we do the entire project approval for 2 million tonne metal production, of course, we keep sufficient expansion of the mines, which are currently at 17 million tonne ore production to go up to 35 million tonne of production. This will also see a jump in silver production from currently 700 to 800 tonnes to about 1,500 tonnes.

Thank you. And of course, we're also quite excited about the Formwork Phase 2 project in Zing International. And that project is almost 80% complete. We are targeting mechanical completion by the end of December as we previously guided and hoping to ramp up thereafter in the last quarter of FY '26. So that will add another 4 million tonnes run of mine. And currently, we're looking at just under 200,000 tonnes of zinc MIC every year.

[Pallav Agarwal, analyst]

Sure. Yes. And lastly, what could be the potential impact of the U.S. tariffs on exports from India? What is the level of exposure that we have to the U.S. market?

[Charanjit Singh, executive]

Yes, absolutely. Even in the last quarter, right, because in the last quarter, it was just after the announcement, and we basically said that as a business, given our majority commodity exposure in both zinc and aluminum, we're in a very fortunate business in terms of more than 75% of our zinc goes into India domestic market and 65% of aluminum goes into domestic market as well. And as it stands, we only have a 3% exposure in terms of our aluminum business into the U.S. So we still maintain the position of limited exposure even with the current announced 50% steel and alumina tariffs.

[Operator]

Our next question comes from the line of Jatin Damania from Swan Investments.

[Unknown Analyst]

the question is more on the parent front, where we have significantly different balance sheet. And for this financial year also, we started to [indiscernible] but coming to our next year, we have a repayment of about $700 million. So I just wanted to know regarding the repayment, how are we going to -- are we going to refinance that loan or probably will be supporting the internal accruals sometime?

[Ajay Goel, executive]

Right, sir. And just if I get you clearly, you mean Vedanta Limited or Vedanta Resources.

[Unknown Analyst]

Vedanta Resources.

[Unknown Executive]

So first, you're right. I mean the debt debt for Vedanta results over the last many years has been declining. So deleveraging is our big priority. So from 8.9 3 years ago, down to 4. And as on June 30, it is further down to 4.8 billion. So over the last 5 quarters, the variable debt is lower by almost $1 billion. That journey will continue. And you may have noted last year during the investor call, we announced that Val will deleverage $3 billion over the 3 years, that commitment remains unwavered.

If I speak of the current system, for the remainder of 9 months, the requirement for loan refinancing at [indiscernible] is almost $320 million and interest $450 million, total about $770 million.

So through a mix of refinancing and some dividend, which, of course, remains a Board decision, it will be managed. Net-net, we debt in the current fiscal will go down by $0.5 billion, down to JPY 4.3-odd billion. Now speaking of Vedanta Limited, which is the operating company. And here, the right metric remains net debt-to-EBITDA, more so in a high-growth environment. You may have seen our results, our leverage is better off by debt-to-EBITDA is 1.3x vis-a-vis 1.5x at the last year at the same time. At Vedanta India, by the end of the fiscal, our leverage will further improve to 1x where our profitability will be bigger than our debt. So we are -- debt target is in value terms, 3 billion in 3 years with Anta, India, 1x leverage by this current fiscal end. .

[Unknown Analyst]

On the same thing, you mentioned that internal as a dividend, which is in the Board decision, but if you can throw some light on the brand fee, which condition 3%, I mean until it here, the transfer will continue or any decision will be taken on this breakdown for you for a period of time?

[Ajay Goel, executive]

[indiscernible], brand fee is not a new subject, as you know, it beginning epi. And what I can affirm -- as we know, the brand, Vedanta and the name is owned by [indiscernible], which has been formally leased to Vedanta Limited and to its subsidiaries. And right now, the current arrangement of 3% brand fee is a valid pillar 2,029 next 4 years. So 3% continues, and there is no plan to change the rate in the near future.

[Unknown Analyst]

And last one, you can be on the update on your Saudi project because now a some Canadian what is your steps on that. .

[Charanjit Singh, executive]

Thank you for that, Jason. I think so we've received the strategic Mundra license for [indiscernible] side bulk that's on the exploration side. And I think that sites -- I just want to give you a quick update maybe on the overall Saudi copper project. The site has an estimated exploration potential of about 25 million to 13 million tonnes at about a 1.3 average copper grade associated with that and about 3 grams per tonne gold. So we're quite excited about the exploration prospects there. As we've indicated, we still aim to invest $2 billion in projects there. The 2 projects, as we've discussed previously is the MOU that we've signed with the Ministry of Investments and the Ministry of Industry and Munde resources to set up the 400,000 tonne per annum copper smelter and refinery and the 300,000 tonne copper rod project. Happy to report that on the Pope Rod project, we have identified the land. We have identified the EPC, that is the contractor, and we are going for final approvals. On the copper smelter and refinery project, that is a longer term project, and we are still working on the feasibility study. But we will, of course, come and update you in the subsequent quarters.

[Operator]

Our next question comes from the line of Vikash Singh from ICICI Securities.

[Vikash Singh, analyst]

My first question pertains to Slide 20. The in the debt, there is an other debt of INR 2,953 crores. So can we look at what is debt that is?

[Ritesh Shah, analyst]

So on the bridge, you're right, Vikas. It is -- it has impacted a couple of commons .

[Vikash Singh, analyst]

That's right. So maybe almost INR 270-odd crores is the [indiscernible] from zinc on the last payout to Vedanta Limited. It is only a timing difference. And as we pay our income tax next time, the tellers will be adjusted. The significant portion is almost 100 and guarantee that you have given to NPAT as sort of our TSPL demerger. So as you -- as we earlier mentioned, for the power, TSPL demerger, while seeking the safe from Nplate from NCLT order Vedanta on its sector, the creators matters, we gave to Nplate, a bank guarantee, which is a fully cash back.

So INR 1,248 crores is a bank guarantee. And the reminder is multiple bank guarantees given to the government in terms of chain blocks, which are cash margin back. So in summary, they are cash in with Vedanta in terms of fixed deposits for cash, which has been [indiscernible] the bank guarantees. As we augment increase our limit for the bank guarantees, this cash will get released.

[Unknown Analyst]

The second question pertinent Phase 2 project Stage 1, the Promise 250 kt kind of the volumes have not come yet, despite this project has been taken up for almost more than half had back. I just wanted to know the time and when we are going to hit the 200 Kt requirement in the Phase I and Phase 2 also entails $400 million kind of the capital cost on that, usually Phase -- is are cheaper in terms of the same capacity addition. So if you could just give us some insight to what's happening there.

[Charanjit Singh, executive]

Yes. Thank you for that, Vikash. I think as we previously guided, we have had some challenges with mining, and that's primarily the reason why we have not been able to achieve both the grade as well as the volumes Happy to note if you look at the performance on a quarter-on-quarter basis, we are seeing in excess of 50% increases now coming out of the Hamburg MIC, which is absolutely the right direction for us. So mining is now recovered. And not only has the mining recovery in terms of the waste stripping that we've had to do in the open pit, but we're also getting ready the stockpile for the second plant. Now in terms of your question around the capital guidance, Yes, ideally, that should be the case when you're building the second phase and you're kind of using a very similar design, but a few fundamental changes. So firstly, as I mentioned on the waste stripping, we have to capitalize a lot more waste stripping for Phase I -- so that's where the mining CapEx was slightly higher than the Phase 1 capital. Secondly, on the plant. So this is where, I think, created to the team on the ground where we saw the opportunity of actually taking a 4 million tonne run of mine plant 2 and actually debottlenecking it to over 10% already well in design. And that additional 10% has come with an increase in the planned capital cost.

And so that's why the capital is slightly increased. In addition to that, and in compliance with our GSTN standards for tailings the tailings down associated with Phase 2 does need to be better aligned than the original design from 2022 and that we've incurred additional costs on the teens dam as well. But that's the reason for the overall, I would say, cost increases, but I'm happy and social at Jay, that all of this is coming with some benefit. And actually, today, even at LME for around 2,400, which is what the project was initially guided on, we are seeing an increase on overall IRR. So still a good project. still absolutely backing them to reach to that increase over 500,000 tonnes in the next 2 to 3 quarters.

[Operator]

Our next question comes from the line of Rashi Chopra from Citi Group.

[Raashi Chopra, analyst]

I think I just missed some of the detail that you gave about the parent debt. So you said it was INR 4.8 billion. Could you just help break this up between bondsn and bank loan and the repayment.

[Ajay Goel, executive]

Yes, sir. So out of $4.8 billion, Raashi, the bonds are about $3.1 billion and the remainder 1.7 billion are the bank moves. If I look at the mature schedule, maybe for the current fiscal, so the 1 quarter is behind us, we can look at the second quarter starting July to March next year -- next 9 months. So debt repayment obligations almost 20 million and the interest expense is almost 430 that makes 750 million in the remainder of the year. the way we explained it will be a mix of both refinancing and also repayment. If you look at BRL has 2 sources of cash. One is a brand fee. So $380 million has been paid in the first year. as has been the practice in the past. Secondly, in the current fiscal, our dividend payout is about 1.5% yield. Even if we assume a rupee dividend of 5% to 6%, which has been par for the course in the Indian context, it means $850 million will be dividend, $380 million or $400 million will be the brand fee, 1.25. So mostly through internal approvals, we are debt will be managed. That means organic deleveraging of $0.5 billion in the current fiscal. Overall, if you look at slightly midterm picture, what VRL has in the market committed, 3 billion deleveraging over 3 years. and deal being an operating company, our leverage ratio from 1.3x will improve to 1x by the [indiscernible] .

[Raashi Chopra, analyst]

Got it. And so you -- in the first quarter, you will be leveraged by about $200 million

[Unknown Executive]

That's correct. .

[Ritesh Shah, analyst]

By 20-odd million. You're right. .

[Raashi Chopra, analyst]

And in FY '27, what is the payment schedule like?

[Ajay Goel, executive]

Next year, the principle is about $760 million, and the interest cost to almost $450 million, so about $1.1 billion. And that is a very interesting question you asked. If you look at last 3 years, the principal requirement at VRL about $2 billion, interest $750 billion, total $2.7 billion. This is the last year with Vidanta Resources, where the need for cash is about $1.4 billion. Starting next year, it's about $1.1 billion. In FY [ '28 ], it is sub 1 billion. So going forward, as we have earlier communicated, 2 contractual brands fee 400 postmen and even a lower dividend of almost 4% yield, we are managed. So both brand fee equal to interest cost and hence, operating P&L account will be self-funded. And by paying 4% dividend, the entire refinancing will be done. So a dividend of 4% equals deleveraging. So in summary, about $1.1 billion requirement next year and less than $1 billion in the year next.

[Raashi Chopra, analyst]

And is there in a demerger or any delay expected beyond September?

[Charanjit Singh, executive]

I think as we started. I mean, we are very confident that we have the next year in coming up on the 20th. And we will see after that, what happens in terms of the time line, but we remain confident of a favorable outcome in both forums as both Ajay and I have guided and continue to progress in line with our previously shared time line. So we're still targeting a September October time line.

[Operator]

Ladies and gentlemen, we'll take that as a last question for today. I now hand the conference over to Mr. Charanjit Singh for closing comments. .

[Charanjit Singh, executive]

Thanks, [indiscernible], and thank you, everyone, for taking out the time to join us. I hope your questions have been answered. For any unanswered questions, please feel free to reach out to the IR team. We now conclude our call and looking forward to connecting with you in October with a wonderful rest of the day. Goodbye.

[Operator]

On behalf of Vedanta Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.