Vedanta Ltd

NSE:VEDL

Earnings Call Transcript

[Operator]

Ladies and gentlemen, good day, and welcome to Vedanta Limited's Third Quarter Financial Year 2024-'25 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 Relations, Vedanta. Thank you, and over to you, sir.

[Charanjit Singh, executive]

Thank you, Michit. Good evening, everyone, and welcome to Vedanta Limited Q3 FY '25 Earnings Call. On behalf of the team Vedanta, I thank you all for joining us today to discuss the company's quarter 3 and 9 months performance. I hope you had the chance to look at our press release, the earnings presentations and the detailed financials, which are available on the stock exchanges website and also on the company website.

On this call from the Vedanta leadership team, we have with us Mr. Arun Misra, our Executive Director; Mr. Ajay Goel, Group CFO; Mr. Ajay Agarwal, President, Finance and Taxation; Mr. Sunil Gupta, CEO, Aluminum Business; Mr. Anup Agarwal, CFO, Aluminum Business; Mr. Hitesh Vaid, CFO, Oil and Gas Business; and Mr. Chris Griffith, CEO, Vedanta Base Metals. We'll start with an update on company's operational performance by Mr. Arun Misra, followed by financial highlights by Mr. Ajay Goyal, before we open the lines for Q&A. This call is covered by the cautionary statement on Slide 40 of the results presentation.

With this, I now hand over the call to Mr. Arun Misra for his opening remarks. Over to you, Arun ji.

[Arun Misra, executive]

Thank you, Charanjit. Good evening, everyone. Thank you for joining us today to discuss Vedanta's Third quarter FY '25 performance update. I'm pleased to state that we have delivered another outstanding quarter as we continue our journey to deliver USD 10 billion EBITDA in the future. I'm also happy to share that Vedanta Group companies have once again demonstrated their leadership in sustainability in the S&P Global Corporate Sustainability Assessment 2024, earlier known as DJSI ESG Index. Hindustan Zinc has maintained its top position, while Vedanta Limited has been ranked fourth among 248 global diversified metal and mining companies. Vedanta Aluminum business also secured second position in global aluminum peers in the index.

Moving to the quarterly performance. We delivered revenue of INR 38,526 crores, which is an increase of 10% year-on-year and a record third quarter EBITDA of INR 11,284 crores, a jump of 30% year-on-year. Vedanta's aluminum and zinc operations continued their industry-leading cost positioning despite inflationary pressures in the global market, ranking in the top quartile and decile of the global cost curve, respectively.

Business operations, starting with aluminum business. The aluminum business has achieved its highest ever quarterly and 9-month production with 613 Kt, up 2% year-on-year and 1.819 million tonnes, up 3% year-on-year, respectively. In quarter 3 FY '25, the business delivered an all-time high quarterly value-added product at 317 Kt, up 16% year-on-year and quarterly domestic sales at 302 Kt, which is up 29% year-on-year. This resulted in securing our best ever quarterly net effective premium of $262 per tonne on metal sales at aluminum. The EBITDA margin per tonne of aluminum has jumped 50% year-on-year and 5% quarter-on-quarter to USD 867 per tonne. We are well placed to achieve our volume guidance.

Providing some more aspects of our aluminum production cost. On the cost side, the business achieved hot metal production costs, excluding alumina at $896 per tonne, which is the lowest in the past 14 quarters. While the overall hot metal cost of production increased quarter-on-quarter due to sudden jump in alumina prices in the global market; however, we expect cost improvement in the coming months given the significant softening in the global alumina prices currently trading at below $550 per tonne versus the peak of $805 per tonne in December. Additionally, the production ramp-up at our Lanjigarh refinery in the coming months will enable us to bring down the overall cost.

Moving to Zinc India. We achieved 265 Kt of mined metal production and 259 Kt of refined metal production. With the quarter 3 production, we delivered highest ever 9-month mined metal and refined metal production this year. The production cost of the quarter stood at $1,041 per tonne, improved by 5% year-on-year. We are on track to achieve the lowest full year production cost in the last 4 years, while also achieving our guidance for mined metal, refined metal and cost of production in FY '25. In our Zinc International business, overall volumes increased 12% year-on-year and 6% quarter-on-quarter to 46,000 tonnes. Our Gamsberg mine delivered a strong 21% year-on-year and 10% quarter-on-quarter increase in MIC production of 35 Kt. In January '25, Zinc International achieved a monthly run rate of 18 Kt, reflecting a continuous improvement.

On the cost side, we delivered the lowest quarterly cost of production for Zinc International in the last 7 years at $1,181 per tonne, driven by higher and efficient production and lower TcRc, much ahead of our guidance of $1,300 per tonne. Talking about oil and gas business, natural decline in our fields has been partially offset by infill wells brought online in Mangala, Aishwarya and Raageshwari deep gas fields. We drilled 9 infill wells across the Mangala and Aishwarya fields in quarter 3 FY '25, thereby taking the total count of infill wells to 18 in the initial 9 months of FY '25. Our EBITDA performance improved 2.5% sequentially, supported by improvement in price realization despite some slackness in volume. To unlock the potential of our East Coast deepwater block, we have recently awarded contract for controlled source electromagnetic review. This advanced technology shall help us derisk the prospect and prioritize the drilling sequence.

We expect to complete this activity by May 2025. Our iron ore business has been a strong increase in quarterly production, rising 10% year-on-year and 17% sequentially, primarily driven by the Bicholim mine in Goa. Despite the geotechnical and operational issues encountered at the Bicholim mine, we have now achieved the production run rate of 2.4 million tonnes per annum for saleable ore. Looking forward, with the pig iron business receiving environmental clearance for 1.2 million tonne per annum capacity, we are geared up for improved realization and profitability in the business.

Now let me provide an update on our key growth projects. First on aluminum business. I'm delighted to announce that we have successfully doubled our rolled product capacity at BALCO to 100 KTPA. With this commissioning, Vedanta has become the second largest producer of rolled products by capacity in India. There has also been an addition of 30,000 tonnes per annum aluminum silica ingots and 50,000 per annum slab capacity.

Moving on to the Lanjigarh refinery. The ramp-up of Train 1 is now progressing steadily. Despite some teething issues and challenges on the supporting infrastructure side, we are making gradual progress. Train 2 is scheduled for commissioning in quarter 4 of current fiscal year. In addition, the BALCO smelter expansion is now in an advanced stage with commissioning targeted in quarter 1 of FY '26. In Zinc India, the 160,000 tonnes per annum roaster at Debari and 510,000 tonnes per annum fertilizer plant are progressing as planned with final commissioning targeted for quarter 4 of the current fiscal and quarter 4 of the next fiscal, respectively. Our alloy plant is ramping up as per the plan and have achieved a run rate of generating annual EBITDA of INR 150 crores to INR 160 crores.

In our journey for 2 million tonne smelter expansion, we are targeting to commission the next phase of 250,000 tonnes per annum of smelter by FY '27, '28. At Zinc International, which is one of the largest zinc deposits globally, our Phase 2 expansion project is in full swing with commissioning targeted in FY '26. In our merchant power business, Meenakshi and Athena power plants are scheduled to be operating at full capacity in FY '26. With this, our merchant power operating capacity will increase to 5 gigawatts within the next 12 to 15 months.

In summary, we have delivered our strongest ever quarter 3 performance. Building on this momentum, we are confident of delivering the highest ever yearly EBITDA in FY '25. Looking ahead, FY '26 will be a transformational year for Vedanta. We are confident of successful completion of our key growth and integration projects in the coming months that will place our key businesses in the top decile of the global cost curve while also driving the volume growth. We remain dedicated to creating long-term value for our stakeholders through operational excellence, strategic growth and unwavering commitment to sustainability.

I will now hand over to Ajay for an update on financial performance.

[Ajay Goel, executive]

Thank you, Arun, and good evening, everyone. I'm delighted to share yet another quarter of outstanding financial performance and strategic progress. Q3 has been marked by exceptional growth across our key businesses, reflecting the strength of our operational execution and disciplined financial management. Additionally, our continued commitment to strengthening the balance sheet has resulted in significant upgrades to our ratings and the debt position, reinforcing both our financial resilience and the market's confidence in Vedanta. In Q3 FY '25, we delivered the highest ever third quarter EBITDA in our history, reaching INR 11,284 crores, a strong 30% growth Y-o-Y. This achievement reflects our consistent trajectory of EBITDA expansion, supported by volume growth and structural and sustainable cost initiatives.

Our EBITDA margin expanded by 517 basis points Y-o-Y to 34% and the profit after tax PAT surged 70% Y-o-Y to INR 4,876 crores. Additionally, our ROCE improved by 170 basis points Y-o-Y, reaching 24%, a testament to our capital efficiency and disciplined allocation. On a 9 months basis, we achieved record performance with EBITDA rising 40% Y-o-Y to INR 31,924 crores and PAT soaring 151% to INR 14,438 crores excluding last year's onetime Cairn arbitration gain and other exceptional items.

Turning to our debt position and the impact of corporate actions at both Vedanta Limited and Vedanta Resources Limited. As on Q3 FY '25, our net debt stands at INR 57,358 crores with a net debt-to-EBITDA ratio of 1.4x, the best in the last 7 quarters. This marks 4 consecutive quarters of improvement, demonstrating our commitment to reducing leverage and progressing towards our target of bringing this ratio below 1x. Free cash flows pre-CapEx generation stood at INR 6,766 crores in Q3, up 57% Y-o-Y, further strengthening our liquidity position. As a result, our cash and cash equivalents stood at INR 21,138 crores as on December 2024.

Moving now to VRL and the bonds. A key highlight is the significant progress we have made in deleveraging our parent company, Vedanta Resources, VRL. Over the last 2.5 years, we have reduced the debt of VRL by $4.3 billion, bringing it down to $4.8 billion, the lowest level in a decade. In the first 9 months of the current fiscal year alone, the VRL's debt has been declined by $1 billion. Further, in the last 4 months, we have restructured VRL's entire $3.1 billion bond portfolio, securing longer maturities of up to 8 years, more favorable covenant terms and a significant reduction in our debt cost by 250 basis points. This momentum will continue as we drive further deleveraging, optimizing capital structure and secure more favorable financing terms for both VDL and VDRL.

An update on our ratings. Our strong business performance and improved liquidity have translated into significant rating upgrades. Both CRISIL and ICRA has augmented Vedanta's rating to AA, while VRL has seen an impressive 6-notch improvement over the last 12 months, reaching a B+ rating. These upgrades reaffirm the strength of our financial position, both on the P&L and balance sheet, and underscores the confidence the marketplaces in our strategic direction. On the demerger front, we are in the important stage of execution. The shareholders and the creditors meeting scheduled on Feb 18. This transformative step is poised to unlock significant value for our investors.

In summary, Q3 has been a pivotal quarter, marked by strong financial performance, enhanced credit quality, balance sheet strength and progress on the demerger. Looking ahead, we remain steadfast in our focus on robust cash generation, further deleveraging and cost leadership. With a solid balance sheet, improved ratings and a clear strategic direction, Vedanta is very well positioned to capture opportunities in an evolving global landscape.

Thank you. I'll now hand over to moderator for any Q&As.

[Operator]

[Operator Instructions] The first question is from the line of Amit Lohati from Emkay Global Financial Services.

[Amit Lahoti, analyst]

Congratulations on these numbers. My first question is on bauxite and coal mines commissioning time lines that were given last quarter. So the question is, do they still hold? Or is there any change?

[Arun Misra, executive]

So bauxite and commissioning, so they still hold. We are looking at FY '26, some in quarter 3, some in quarter 4, yes.

[Amit Lahoti, analyst]

So in the last quarter, it was Q1 for the Sijimali bauxite mine. So is it changing?

[Arun Misra, executive]

Yes. Q1 of next fiscal, no?

[Amit Lahoti, analyst]

Yes, Q1 of FY '26, correct. So my second question is that we have reported hot metal cost ex aluminite, $900, which the company has highlighted that it is lowest in the last 3 years. So what has contributed to this benefit in Q3? And then are there enough levers with us to reduce it to even lower levels in the coming quarters?

[Ajay Goel, executive]

We have the aluminum team on the call, Mr. Anup Agarwal and Sunil Gupta. Anup, would you please address this question?

[Anup Agarwal, executive]

Yes. Thanks, Ajay. So Amit, to your question, if you would recall, last time also I had covered that in power due to increased materialization, better [ GCB ] and the better planned PLF, the cost will progressively come down in the next 2 quarters. And we had also indicated a number of $40, $50. And you can see that of it, $25 has come down in quarter 3. Another $20, $25, we believe will come down in quarter 4. And to your question, whether we have further levers, I can say that the lever maybe to the extent of $100, maybe $30, $40 will come out of the operating efficiencies and the balance will come as and when we ramp up our captive coal blocks. I hope that answers your question.

[Operator]

The next question is from the line of Amit Dixit from ICICI Securities.

[Amit Dixit, analyst]

First of all, congratulations for a very good set of numbers in a very challenging quarter. I have 2 questions. The first one is on oil and gas. So while I understand that the ASP injection is in progress, we have been making -- we have been taking a lot of initiatives on that front, but still we see a secular runway decline in oil production. Just wanted to understand when this decline will be arrested, and we can see actually a bump up in the production.

[Ajay Goel, executive]

We got oil and gas CFO, Hitesh on the line.

[Hitesh Vaid, executive]

From an oil and gas field point of view, our current production is primarily from the discoveries, which we made a long time back. And as it happens in this industry that these fields start maturing and declining. And obviously, we -- our job is to manage this decline through good reservoir management practices, which we've been trying to do. One of the drivers for us to arrest this decline materially and move up the curve is, of course, the benefit, which ASP injection will help us. That project is happening. And in say, in first half of FY '26, we'll start the injection into the larger part of the field, and we'll start realizing the benefit.

But in terms of near-term volume acceleration, what we are trying to do is work on infill opportunities in our existing field and try to manage that decline. So that is the objective. Twofold. One is to accelerate that ASP injection process so that we can correct the decline and move the curve upward. And second is how do we bring in more infill wells to manage our current decline. And of course, as we had said earlier as well, that beyond this, what we are also trying to do is build a larger portfolio so that we have additional opportunities through which the volume can come in. So for example, our OALP block, which is the Jaya field, which is currently producing around 3,000 to 4,000 barrels, that is what -- and which gives us an extra cash per barrel.

We are going to do a couple of more wells in the same block in 2, 2.5 months' time, and that will give us near-term volume opportunity. And beyond that, of course, Northeast where we are doing exploration, that is -- at least the well, which we are doing now has given us positive results, and we hope to make that work. And the other part, which is a bigger part in that piece is in the deepwater block where we have just started the survey also. The contract has been awarded. And in -- by May, we should be ready with our drilling plan to start next year. So that's the broad plan of how we are trying to manage the current production as well as what we are doing to have an uptick in volume going forward in the next financial year.

[Amit Dixit, analyst]

Very elaborate answer. So what it means is that in H2 FY '26, maybe we can see the production bumping up if all these initiatives and steps go in the right direction. Will it be a reasonable assumption?

[Hitesh Vaid, executive]

The way I will interpret is that for H2, we will see the benefit. The largest benefit from the ASP injection, which we have already invested money and are doing a small injection as well as of now. But from now to the next 6 months, we are doing a lot of infill wells for which the approval was there, and those wells are also starting to come online. So we'll start seeing incremental volumes from them, which will arrest our decline and have a stable volume going forward.

[Amit Dixit, analyst]

Okay. Got it. The second question is on Zinc International. Now massive improvement in cost, something that we have not seen in Zinc India as well. But of course, the scope to improve existed much more in international. So just wanted to understand how much of this decline is sustainable because it is much beyond your own guidance. So what are the key drivers behind it? And how much of it is sustainable going forward?

[Ajay Goel, executive]

Let me get Chris to address this. And also in case, Chris, you want to give the bigger picture for overall base metal and KCM?

[Christopher Griffith, executive]

Okay. Ajay, thanks. Thanks for the question. I think we had a really spectacular third quarter in terms of cost. I think that's probably a little bit better than we're expecting to do. And my expectation is that we should see the cost range between $1,200 and $1,300. So that's massively down from the sort of $1,600, $1,700 a tonne that we were seeing earlier on in the year. So this is perhaps a little bit better than we would expect going forward. But what we have been seeing is a sustainable increase in the volume from ZI. So we're going through a particular weak patch last year and this year as we needed to increase the amount of stripping, we had some geotechnical challenges. We needed to push back the one wall of the one pit. We had very, very constrained areas in the remaining pit, in the second pit, that we were going to hold underground workings.

So all those challenges, I think, we've largely worked themselves through. We've increased the stripping, just to give you an example. From the beginning of this financial year, we were stripping at about 4.5 million tonnes per month. We've just hit 2 months in a row at 8 million tonnes a month. So that's the rate that we require for both of the Phase 1 and Phase 2. So I think we're finally starting to get ourselves into a much more sustainable position. This next year that we're seeing -- so we will definitely see another uptick again in the fourth quarter. And then in the year of '26, we're going to see another much more sustainable performance from ZI. So what you should see is overall lower cost than we have been seeing, but perhaps not quite as good as the $1,100. And as I've said, I think the range should be in about $1,200 to $1,300.

And then as Arun said in the introductory session, what we will see is that at the end of this financial year, so at the very end of '25, we'll see the completion of Phase 2 and then in the first quarter of next year. So the end of the financial year '26, we will have ramped up the production. So 2027, then we see production from both Phase 1 and Phase 2. So overall, we're expecting to see continued improvement and much better results from ZI going forward. And then, Ajay, just to check, while I'm speaking, would you like me just to talk a little bit about KCM?

[Ajay Goel, executive]

Yes, please.

[Christopher Griffith, executive]

Okay. Folks then while I'm chatting, I'll just give you a little bit of an update. You'll recall that we started production in September after having got the asset back. That was just sort of getting going. So we only had a very, very small production in September. But then from Q3, we ramped up to sort of about 8 kilotonnes of copper a month. And in the next quarter, we're going to be ramping up further from this month, we should do about 10, ramping up to about 15. So already after just 6 months of production, we're going to be at a run rate of sort of 160 to 175 kilotonnes of copper. So that's almost at the run rate that we were before the business went into liquidation. So in this coming year, we should see a much better performance. So we're going to deliver about 60 kilotonnes of copper in the 6 months.

And then what you should see next year, I reckon, in the region of 150 to 200. So we'll give you proper guidance, of course, at the end of the year. But KCM is ramping up very nicely. Of course, in the beginning, it's going through all the teething problems of 5 years of liquidation. We've got quite a bit of sort of normal maintenance and fix up capital that you would expect after that kind of time frame of being in liquidation. All of that is planned. The fundraising process is well underway. So I think we're very well positioned for this coming year to be in a fantastic position to deliver, as I mentioned, very solid performance from KCM on this amazing copper asset.

And just to remind you, I mean, KDMP as we are, is 3.5% copper. We've got 50 years' worth of life at 300 kilotonnes of copper. So the primary integrated, our own production is ramping up nicely. Custom was very low treatment charges with sort of a bit of -- we'll manage that as we go along because, of course, we don't just want to chase a copper production number and lose money as a result. So custom, we'll see how that goes, but our integrated production starting to deliver very nice numbers and next year should be a fantastic year for us. I'll pause there, Ajay.

[Ajay Goel, executive]

Thank you.

[Amit Dixit, analyst]

So did I hear you right when...

[Operator]

The next question is from the line of Ashish Kejriwal from Nuvama Wealth Management.

[Ashish Kejriwal, analyst]

Congratulations to the entire management team basically for managing your aluminum operations well as well as debt situation of Vedanta Resources, the parent company. Kudos to you guys. Sir, my 2 questions. One, obviously, on alumina. Last quarter, we said that we were operating at 3 million tonne run rate. So what went wrong because we end up with 2 million tonne run rate entire quarter. So what went wrong and where we are currently? And is it possible to guide how much we can produce in Q4 or FY '26? That's my first question.

[Ajay Goel, executive]

I request Sunil Gupta and Anup to address this, please.

[Anup Agarwal, executive]

Thank you, Ajay, and let me address this. So Ashish, to your question, you're right. Last time, we said -- and let me reiterate, from a technical capacity point of view, we touched the run rate of 3 MTP on multiple instances during quarter 3, okay? However, having said that, the same could not be sustained throughout due to unplanned shutdowns and infra handling and Arun ji covered that. Now going forward, we believe that most of these issues are behind us or will get addressed in, say, a month or 2. Now if you were to ask me quarter 1, where we will be? Ashish, with confidence, we can say that at least 60%, 65% of our requirement will be met through captive sourcing. Quarter 4 maybe will be higher compared to quarter 3, if I were to give a number, can be anywhere between 10% to 15%.

Now having said that, I would also like to cover the bigger picture. As you know, that Train 1, as I said, will be closer to 3 million tonnes per annum or the rated capacity as we exit this year. Quarter 2, we will start commissioning in quarter 4 of this year. And taking from the learnings that we've had during the commissioning of Train 1, we believe next year, at least 70% of our requirement, we should be able to address through our captive alumina production.

[Ashish Kejriwal, analyst]

That's very helpful. Second question is on International Zinc. What we heard is that in Jan, we were operating at 18,000 tonnes per month. And obviously, you mentioned that it's going to ramp up further. So because we have seen many times lots of issues going over there and because of which our production fluctuates. So are we seeing that now we are -- these sort of issues are behind us and at least we can do 18,000, 20,000 tonnes per month going forward? And when the second phase of expansion is going to be commissioned, are we seeing any volumes coming in for the second phase in FY '26?

[Ajay Goel, executive]

Requesting Chris to address, please.

[Christopher Griffith, executive]

Okay. So I'll just mention some of the points that I made earlier, is that, we have made significant progress in addressing the challenges that were hampering us. And those were just to recap, a historical under-stripping, a number of geotechnical issues, which forced us to actually stop 1 of the 2 pits and push back the whole wall. That still -- that process will still be taking the whole of this coming year, the whole of '26 to complete. Because we stopped 1 of the 2 pits, we only had the 1 pit. We are delivering volume out of 1 of the 2 pits. So we're getting ourselves into a much more sustainable position. We also were mining through historical underground working. So the 1 pit of the 2 that we had was work going through underground holes that made it very difficult to have open pit mining.

Now I mentioned that we have made substantial progress. We've mined through those underground workings. We still only have 1 pit available. And during the course of '26, we get ourselves into a position where we start getting 2 pits producing. So now I think '26 will still be a fairly challenging year for us. but we should see a substantial increase in the production from ZI. So we should do somewhere between 160 and 180 kilotonnes of production this year. And next year -- this is not our guidance. We'll give official guidance at the end of the year. But we'll see somewhere between sort of 240, 250 kilotonnes of production from Gamsberg and Black Mountain next year. So a very substantial pickup in production over 20%, 25% next year. But what we won't see is any of the production because we only finished the Phase 2 plant at the end of the financial year '26.

So you'll see both Phase 1 and Phase 2 delivering in 2027. So next year, to summarize all of that, much better production. We've worked ourselves through most of the problems. We're at the run rate of stripping, I mentioned 8.5 million tonnes per month is double what we were started at the beginning of the year at 4.5 million. So again, we're stripping at the rate now that we need for both plants. So we've got a little bit of catch-up to do, and we'll see that catching up during the course of 2026. So I would say that 2026, most of the problems are worked through, but we're still going to be, I think, fairly tight. And under those circumstances, if anything goes wrong, then it does impact you. But we're going to be in a much better position next year. And then from 2027 onwards, you're going to see ZI in a fantastic position. And then it will be generating cash flow that I think we'll be proud of.

[Operator]

The next question is from the line of Ritesh Shah from Investec.

[Ritesh Shah, analyst]

Congratulations for a great refi. First question was on capital allocation. I think Chris made a comment on TcRc, and you also indicated looking at integrated production. So just wanted to have some thoughts on -- I don't know whether it's with respect to the MOU in Saudi Arabia, $2 billion, will it be at Vedanta India level or at VRL level? How should we look into that?

[Ajay Goel, executive]

Ritesh, could you please paraphrase your question? So is the question that will KCM be part of -- structurally part of Vedanta Limited?

[Ritesh Shah, analyst]

No. Vedanta Copper, basically, we have signed an MOU with Saudi Arabia to invest $2 billion. It's for an integrated smelter refinery. So I wanted to understand what the status of this particular project is and whether it will fall at Vedanta India or at VRM level.

[Arun Misra, executive]

Project with Saudi Arabia, only -- let the concept be fully proven, then we decide the structure and the investment strategy around it.

[Ritesh Shah, analyst]

Right. But sir, do we have clarity that -- sorry, sir go ahead.

[Ajay Goel, executive]

Yes. From a structuring viewpoint, it is a part of Vedanta India consol. So it is a part of VDL and not VRL. Now in terms of project status, yes, it is progressing quite well on schedule. And from allocation of capital viewpoint, the number that you heard is $2 billion. That is over the time frame, multiple years. But in the near future, over the next couple of quarters, it is very, very small. If you also look at the multiple priorities that government of Saudi Arabia has proposed, they want to also look at areas beyond oil and gas. And metals and mining has been identified as one of the important areas for development. So any project in Saudi Arabia around metals and mining also will see multiple government partnerships.

Now that can be around a significant subsidy on CapEx. It also means multiple benefits in terms of cost. Example, that means the power cost; at the same time, the lower cost of funding. So net-net, it will lead to a partnership between the government and Vedanta project progressing well. Right now in nascent stages. And the cost of funding and capital -- CapEx will be quite minimal over the next couple of quarters.

[Ritesh Shah, analyst]

Sure. That helps. Sir, I have a couple of questions, please bear with me. Sir, my second question was on the debt refi. I would presume the total number is around -- you indicated $4.8 billion, but that would be excluding ICL. And to what my memory serves, I think ICL was due in December '24. So just wanted to know what the status is on ICL. And second related question is, I would presume the loans would be around the $2 billion, what is the weighted average cost over there? Those are specifically related to debt and loans that we have available.

[Ajay Goel, executive]

Sure. So starting with the first one, you're right, the amount of $4.8 billion at Vedanta Resources, it is only the external debt. And you also got to transpose on that $0.4 billion, $400 million is the intercorporate loan. Total in that case, debt at VRL becomes $5.2 billion all in internal, external. Now the ICL, you're right, was due in December. Now the Board has decided and recommended to extend this ICL by almost 15 months. So out of $400 million, the loan now becomes due in over 2 tranches. So $200 million is due in January '26, so it is 1 year from now. Another $200 million is due in May '26. So it has been extended by, on an average, 15 months.

Now if I look at the current debt stack at Vedanta Resources, $4.8 billion, one can think of 3 cohorts, roughly $3 billion, $3.1 billion is multiple bonds, and that is what we have restructured over the last 3, 4 months. Another $1 billion is multiple bank loans, which are mostly from the Indian state PFC bankers. And the remainder $1 billion is basically the PFC from StanChart. So $3 billion bonds, $1 billion bank loans and $1 billion PFC. Average cost, you mentioned?

[Ritesh Shah, analyst]

Yes, sir, average cost, sorry. Sorry to interrupt.

[Ajay Goel, executive]

Sure, please. The average cost as on -- from 13.3% at the year beginning is now down to almost 11%. And as we also repay and refinance this PFC in April and August, in that case, the cost of debt at Vedanta Resources will come down to a single digit, almost 9.8%, sometimes in July, August of the current calendar year.

[Ritesh Shah, analyst]

This is quite useful. Sir, is it possible to explain the underlying reason for the deferment of ICL, given payouts have been nice. So from a priority standpoint of cash flows, how should one understand that? Or the other way to put it is, what are the terms on the ICL right now?

[Ajay Goel, executive]

See, if you look at overall group's cash management and maybe look back over the last 9 months, where VRL has been deleveraged by $1 billion. Even at Vedanta Limited, which is led by operating free cash flows and the multiple corporate actions, so be it QIP, offer for sale for zinc 1.5%, we have significant cash and cash equivalent, as I mentioned, INR 21,000 crores. The feedback from the investors, both on the debt and equity has been to look at this ICL deferred by almost 1 more year. So it does help the group in terms of optimal cash management and, of course, following the due process, which means we take Board approval and even multiple legal opinions and view by the EY. So it is the cash management overall.

[Ritesh Shah, analyst]

Sure. Sir, a few bookkeeping questions. We have not touched upon Athena and Meenakshi. I think Arun ji, in the initial remarks, indicated that we expect that commissioning in FY '26. Please correct me if I'm wrong. I wanted to understand the commissioning schedule over here? Are we looking at short-term, long-term PPAs, what the status is? And do we have any linkages -- or do we -- are we looking at imported coal? Just trying to understand the economics and the cash flow from the power assets, which are quite significant.

[Arun Misra, executive]

So both Meenakshi and Athena, yes, you are correct. Sometimes it will -- is supposed to come to full capacity in FY '26. Of course, coal always will look at as much as domestic coal linkage-wise possible running through options. Also, we will look at synergy with our coal mine [ collaborate ] to other units, how do we synergize that? That could be another option. And yes, they will have a final capacity of 5 gigawatt maybe in the next 12 to 15 months once they are commissioned.

[Operator]

The next question is from the line of Raashi Chopra from Citigroup.

[Raashi Chopra, analyst]

Just continuing with the question on the debt. So now the interest cost should be somewhere around $515 million, right? And from a repayment perspective, this year is about $800 million for the [ stand free ] loan? And what would be the amount pay for next year? This is for PFC.

[Ajay Goel, executive]

Okay. So maybe, Raashi, I will give you overall picture for Vedanta Resources. And you're right, with the recent deleveraging and the bond refinancing, the interest cost at VRL for the full fiscal is almost $500 million, $0.5 billion. The total repayment due next fiscal is about $900 million. So $0.9 billion is a principal, $0.5 billion is interest, so $1.4 billion. Now how this will be serviced? There are 2 sources of cash and income at Vedanta Resources. Brand fee is $400 million to $450 million, and that leaves $950 million to $1 billion as a principal. Now as you may have seen over the last 3-odd years, the payment of dividend and at VR receipt is about $2.5-odd billion. Going forward, even by paying almost 1/3 the dividend of historical average, the VRL debt can be easily managed. So it is $0.9 billion principal and $0.5 billion interest cost, $1.4 billion for the full fiscal.

[Raashi Chopra, analyst]

And for FY '27, what is that number in terms of the principal repayment?

[Ajay Goel, executive]

Principal is almost $650 million and the interest cost will be even lesser, I would say, almost $400 million to $450 million. So give and take $1 billion to $1.1 billion, both principal and the interest in FY '27.

[Raashi Chopra, analyst]

Got it. And at the India level, what is due for repayment now in this year, FY '25, $600 million or...?

[Ajay Goel, executive]

For the current fiscal?

[Raashi Chopra, analyst]

Yes.

[Ajay Goel, executive]

It's -- if you look at Vedanta Limited stand-alone, it is -- you're right, almost $0.5 billion. And Vedanta consol, about $1.2 billion. And for India, as you know, it's a different Raashi, because our entire debt is secured. And so refinancing or repayment is a bit different at Vedanta India consol.

[Raashi Chopra, analyst]

Got it. On the CapEx side, what has been spent in -- I mean, are you on track for your $1.9 billion target? What has been spent in the 9 months?

[Ajay Goel, executive]

So 9 months is about $1.15 billion. And we are -- we will be in the ballpark of $1.5 billion to $1.6 billion in the current fiscal on CapEx.

[Raashi Chopra, analyst]

And just one last question for me. On the -- I think this time, you haven't given the slide with your targeted volumes and costs. So for aluminum, the original target was, I think, for FY '25, 2.3, 2.4. So where are we at now for the fourth quarter?

[Anup Agarwal, executive]

So on the volume, we should be slightly above 2.4 million tonnes as we exit this year on the hot metal.

[Raashi Chopra, analyst]

And on the cost side for aluminum?

[Anup Agarwal, executive]

Cost, let me tell you, in the quarter 1, let me tell you, and we spoke, the cost drivers from here would be, one, the captive alumina as we ramp up our alumina. And on the bottom alumina, we've already spoken about the prices coming down from the levels of $800 to $500. Now if you ask me where the cost will be in quarter 1, we can very well say that the alumina cost would be 15% to 20% lower than what we saw in quarter 3. Quarter 4, because of some high cost inventory and the material in transit, alumina cost will remain at the elevated levels. So broadly, if you ask me for the year as a whole, we should be somewhere around $1,800 on the hot metal cost for FY '25. This $1,800 will be for FY '25.

[Operator]

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

[Indrajit Agarwal, analyst]

A few questions. First, on the 2 large projects, that is Ghogharpalli mine and Sijimali mine, what are the milestones that are still to be received or achieved? And what should we look out for, for timely commissioning? Because bauxite mine Sijimali is actually as soon as next quarter. So how should we look at it?

[Ajay Goel, executive]

Sunil, would you address this?

[Sunil Gupta, executive]

Yes, I will address this. So coming to the Sijimali mines, we have already in the -- 96% of our land acquisition is over. We are in the advanced stage of the forest clearance, and we might get maybe another 1, 1.5 months' time, we will get the forest clearance. So we are at the advanced stage of Sijimali operational. Maybe in the quarter 2, we are going to start the Sijimali mine. This is the status of Sijimali mine. For the Ghogharpalli mines, we have already taken the action on the ground. Land acquisition, alienation of land is already completed. We have application for EC has been filed. Application for ML has been filed. So we are on track as far as the Ghogharpalli. And mining plan is already submitted to MOF, and I'm very hopeful that quarter 1 of, as per the original guideline -- original target of Ghogharpalli, quarter 4 of FY '26, we are going to take out the first group out of Ghogharpalli.

[Indrajit Agarwal, analyst]

Sure. This quarter, we also had a slight increase in alumina cost of production, captive alumina cost of production. What were the drivers for that? And how should we look at it going forward?

[Ajay Goel, executive]

Anup.

[Sunil Gupta, executive]

Anup ji?

[Anup Agarwal, executive]

Yes, I'll do it. So [ Ashish, ] you're right. See, we've had a marginal increase in our cost of alumina production. And that is to do slightly with the imported bauxite cost that -- imported bauxite that we've consumed more compared to the earlier quarter. And going forward, so let me again reiterate. -- see, what is going to happen is maybe if you look at the full year picture, [ Ashish, ] we would need broadly 10 million, 11 million tonnes of bauxite next year, broadly I'm saying. Out of it, 60% should be through the domestic sources, OMC and some other sources. 25% to 30%, we believe should come from Sijimali once it starts and then ramps up.

So you can see that maybe 10% to 15% is what will be the imported cost. And we believe as we progress along, this imported bauxite cost would come down. And accordingly, the alumina cost should be closer to the levels of 320, 325 for the year.

[Indrajit Agarwal, analyst]

Sure. And one last question, if I may, on the KCM operations. At 160, 180 kt kind of run rate, assuming today's copper price and TcRc, et cetera, what kind of annualized EBITDA can we generate over there?

[Ajay Goel, executive]

Again, I'll go back to Chris for this question.

[Christopher Griffith, executive]

That's a very good question. And I'd like actually not to respond to that now. Can I ask Ajay through you that we respond, I'll get that number to you. It's actually some -- it's work that we are underway at the moment running our business plan. And we've also got to make assumptions about what the custom treatment charges and the custom earnings will be. So can I ask Ajay through you that I don't answer that now. We'd rather get back to the gentleman that asked that question shortly.

[Ajay Goel, executive]

Sure. So Indrajit, as you would appreciate, the whole KCM is under ramp-up. And right now the management is focused singularly on operations and the ramp-up. This mine has become operational after 3, 4 years. And hence, maybe the cost right now won't be a good indication. So allow us a couple of more months' time. And once we publish our full year numbers or before that, we will come back to you in terms of both EBITDA and the cash estimates for KCM for next year.

[Operator]

The next question is from the line of Pallav Agarwal from Antique Stockbroking.

[Pallav Agarwal, analyst]

So just a clarification, KCM is still part of Vedanta Resources, right? Or is there any plan of shifting that to the base metal business during the restructuring?

[Ajay Goel, executive]

Yes, you're right. It is a part of Vedanta Resources. And right now there are no plans to be discussing actively. So it remains part of Vedanta Resources in the near future.

[Pallav Agarwal, analyst]

Sure. So just a couple of clarifications. So if I look at the Zinc International business, so we've had higher production and lower cost, right? And even zinc price, zinc and lead, zinc has been sequentially higher. So why have we seen a small decline in EBITDA on a sequential basis?

[Ajay Goel, executive]

Chris, would you want to address that?

[Christopher Griffith, executive]

So no, we actually are increasing as the costs are reducing and the volumes are increasing, we're increasing EBITDA. So -- and that will continue again for this fourth quarter as we once again increase production, you'll see an increased EBITDA for Q4. And of course, likewise, that will continue into '26.

[Pallav Agarwal, analyst]

So Chris, I was actually referring to the sequential -- yes, please go ahead.

[Ajay Goel, executive]

You're right. Maybe there's a small impact. Yes. So yes, there's higher volumes, the lower cost as well. And if you look at sequentially, maybe the EBITDA in the second quarter, INR 378 crores and the third quarter, INR 354 crores, small difference, and that is mostly one can attribute towards pricing.

[Pallav Agarwal, analyst]

Sorry, could you repeat that, which pricing?

[Ajay Goel, executive]

So overall, the pricing is a reason, but overall, the volumes are better and so is the cost. The small impact on EBITDA is a function of mostly pricing. So if you see the zinc pricing in the second quarter was a bit different than the second quarter.

[Pallav Agarwal, analyst]

Sure. Okay. Because the average was higher in the third quarter, but yes, maybe this timing difference could lead to that. Similarly, on the oil and gas business, the crude prices were down sequentially and our OpEx also as per the presentation went up sequentially. Even the production, there was a decline. So -- but we've had sequentially higher EBITDA. So any particular reason for that?

[Ajay Goel, executive]

Hitesh?

[Hitesh Vaid, executive]

Yes. See, in the oil and gas business, beyond the oil price volume and cost, one of the factors is our recovery from the revenue of the spend, which we do on CapEx. And as I said, we have started investing money in new infill wells, which will help us to gain volume in the near term as well as the ASP project where the work is happening on the ground. Since I'm spending a bit more in infill wells and development, my profit sharing goes down, and that's why my EBITDA goes up, even though there is a marginal change in the volume as well as a bit uptick in costs.

[Pallav Agarwal, analyst]

So basically, the CapEx affects the profit sharing with the [ government ] and so that really lead to this increase?

[Hitesh Vaid, executive]

Correct. Correct. Because now I'm putting more money to bring volume in the near term. So that helps me to generate additional revenue and EBITDA, which I'm investing in the business.

[Pallav Agarwal, analyst]

Sure. Finally, just on the power business, you've seen a pretty sharp decline in EBITDA on a sequential basis. So is this because of higher costs over there? Or does something change in the TSPL profitability?

[Arun Misra, executive]

It's primarily because of the shutdown in one of the IPPs and which was also a scheduled shutdown. You will see a further improvement in the Q4.

[Operator]

Ladies and gentlemen, this will be the last question for today, which is from the line of Sumangal Nevatia from Kotak Securities.

[Sumangal Nevatia, analyst]

A couple of questions. First, on bauxite, we said that roughly, we're expecting 25% from Sijimali and 25% from imports. Just want to understand what could be the cost difference at the bauxite level or alumina level between these 2?

[Ajay Goel, executive]

Anup?

[Anup Agarwal, executive]

Sumangal, can you just repeat the second half you said, what is the cost...

[Sumangal Nevatia, analyst]

Yes. So I wanted to understand, sir, what would be the cost difference between the 2 source of bauxite. One is from Sijimali mine and the second is from imports at the plant level?

[Anup Agarwal, executive]

See, I'll try and give you some broad numbers. Now Sijimali should be closer to the bauxite cost that we get from our OMC mines. That is what we're looking at. And the -- of course, the imported bauxite costs have been slightly 25%, 30% higher than the domestic bauxite.

[Sumangal Nevatia, analyst]

Okay. So at the alumina level, what could be the difference and what could -- yes, sorry.

[Anup Agarwal, executive]

Sorry, go ahead.

[Sumangal Nevatia, analyst]

No. So at the alumina level, just to get some numbers to -- for some calculation, what could be the difference in the cost of production of alumina from Sijimali's mine bauxite or from imported bauxite?

[Anup Agarwal, executive]

See, broadly, you can assume that the alumina cost will be in the range of, say, 260, 270 if we are using it from the Sijimali. And the same can go up to, say, 330, 335 if we use an imported source.

[Sumangal Nevatia, analyst]

Understood. That's very helpful. My second question is on the royalty. So just want to understand what is the current royalty we are paying? What are the chances of it increasing in the near future? And when is our agreement expiring with respect to the royalty with the parent?

[Ajay Goel, executive]

So the royalty and the strategic fee rate right now remains same, which is 3% for Vedanta Limited. In case of zinc, it is 2%. It is being paid to Vedanta Limited first. And out of that, 0.3% is what Vedanta redeems and the balance 1.7% is a pass-through. So in summary, the rate of royalty has not changed. We don't foresee it changing. When the Board last revised the rate, it was locked for next 6 years. The current agreement is for the long term. It's expiring only in 2028.

[Sumangal Nevatia, analyst]

Understood. Understood. And just 1 last question on the coal mines. So out of the 4 coal mines or at least say, Kuraloi, Radhikapur, Ghogharpalli, has any of them received forest clearance, final forest clearance?

[Ajay Goel, executive]

I'll go to Sunil for this?

[Sunil Gupta, executive]

Yes, yes. So we are in the advanced stage for getting the forest clearance for the Kuraloi mines. So maybe another 1 month's time, we are expecting forest clearance for the Kuraloi mine. And the Ghogharpalli, as I told that we have only applied for mining lease, so it will take another -- for forest clearance, it will take time. But the Kuraloi, for sure, we are going to get for within 1 year's time.

[Sumangal Nevatia, analyst]

And what about Radhikapur, sir?

[Sunil Gupta, executive]

Radhikapur, we are progressing -- well with Radhikapur, we have already got the EC. So there is no issue in that. So Radhikapur, there is no problem. We have everything in our hands. Because of some strategic reason...

[Ajay Goel, executive]

Sorry. Sumangal, can we take this question because I think we have run out of the time. So we can continue with it. You can take it offline with me.

[Operator]

As that was the last question for today, I would now like to hand the conference over to Mr. Charanjit Singh for closing comments. Over to you, sir.

[Charanjit Singh, executive]

Thank you, everyone, for joining us today. I hope we have managed to answer most of your questions. In case you still have any questions unanswered, you can reach out to us. With this, we conclude today's call, and we look forward to reconnecting with you for our full year results towards end of April, early May. Thank you, and good day, everyone.

[Operator]

Thank you, members of the management. On behalf of Vedanta Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.

[Ajay Goel, executive]

Thank you.

[Arun Misra, executive]

Thanks, everyone.