Vedanta Ltd

NSE:VEDL

Q4-2025 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to Vedanta Limited's Fourth Quarter Financial Year '24-'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.

[Charanjit Singh, executive]

Good evening, everyone, and welcome to Vedanta Limited Q4 and Full Year Financial Year '25 Earnings Call. On behalf of team Vedanta, I thank you all for joining us today. I hope you had the chance to look at our press release, earnings presentation and detailed financial statements uploaded on the website of stock exchanges and also on the company website.

On this call, from the Vedanta side, we have with us our newly appointed group CEO, Ms. Deshnee Naidoo, a seasoned leader in the metal and mining space with over 27 years of global experience. This appointment marks the homecoming from Ms. Naidoo, who was previously with Vedanta from 2014 to 2020, and leading the base metal and Vedanta Zinc International business as the CEO.

We also have on the call Mr. Arun Misra, our Executive Director; Mr. Ajay Goel, Group CFO; Mr. Sunil Gupta, Chief Operating Officer, Aluminium business; Mr. Anup Agarwal, CFO, Aluminium business; Mr. Hitesh Vaid, CFO, Oil and Gas business; and Mr. Chris Griffith, CEO of Vedanta business. We will begin with the opening remarks from Ms. Naidoo, followed by an update on the company's operational performance by Mr. Arun Misra; and financial highlights by Mr. Ajay Goel. And thereafter, we will open the lines for Q&A. This call is covered by the cautionary statement on Slide 44 of the results presentation.

With this, I now hand over the call to Ms. Naidoo. Over to you, Deshnee.

[Deshnee Naidoo, executive]

Good evening, everyone. Thank you, Charanjit. It's a pleasure to address you all as a newly appointed group CEO. Returning to Vedanta feels like coming home, and I'm excited to lead us into our next era of growth and transformation. Over the last 25 years, Vedanta has grown into India's foremost natural resources conglomerate. Under the visionary leadership of our Chairman, Mr. Anil Agarwal, we are entering an exciting chapter we call Vedanta 2.0. The goal is clear, to transform the company into a $100 billion critical minerals, Energy, Technologies powerhouse, serving not just India but the world. This vision is rooted in creating long-term value for our shareholders, the community we operate in and the planet we all share.

Looking at the broader economic landscape, FY '25 was a good year for commodities. Global primary aluminium demand grew by 2.7% and zinc demand saw a 2% increase. In India, primary aluminum demand increased by 12% year-on-year and zinc around 6%. That's a 4% and a 3% increase over and above global growth, respectively, driven by robust domestic economic expansion and infrastructure development.

Now FY '26 has started on a relatively volatile note with the global economy facing uncertainty due to the announced U.S. tariffs and retaliatory tariffs we have since seen. However, we are well positioned to weather these uncertain times, with over 40% of our aluminium production and around 75% of our zinc production sales in India, Vedanta's performance is strongly integrated with India's growth story.

Economists are forecasting India's GDP to grow by over 6% in FY '26, and that's despite the tariff impact. Our margin improvement story remains largely intact. While the LME prices of the commodities such as zinc and aluminium are lower compared to their annual average levels of FY '25, input costs have also seen a material decline.

For example, aluminium prices have declined by approximately $300 per tonne from the peak of $2,700 per tonne just in March 2025, while alumina prices have dropped by around $450 per tonne from their peak of $800 per tonne in December 2024. We all set to benefit from our enhanced asset base given the commissioning of our second 1.5 million tonnes per annum Train at Lanjigarh, our 435,000 tonnes smelter at BALCO and the new value-added product capacity that we are bringing on in FY '26 in aluminium. The benefits of our backward integration efforts will be realized during the year with the commissioning of our bauxite mine and new coal mines. We see the incremental value creation from our new assets, offsetting any downside that the weakening in broader macroeconomic terms may pose for Vedanta. So we are well positioned.

Few principles are integral to our strategy. Safety is a core value for us in the company. We are dedicated to learning from our safety incidents and are committed to our 0 fatality goals. Every leader at Vedanta is expected to challenge unsafe practices and uphold our safety standards, ensuring that our workforce returns home safely every day.

In FY '25, we secured power delivery agreements of over 1 gigawatt of renewable energy, and we will enable significant reduction in emissions from our operations in the coming years. We are proud to have directly benefited 26 million women and children and empowered 1.46 million families to skill training. Our efforts have been validated by third-party agencies. Vedanta Aluminium ranked second, while Hindustan Zinc secured first place in their respective peer groups in the S&P Global Corporate Sustainability Assessment.

We are making good progress with our demerger plans, aiming to create pure-play entities that will enhance strategic focus and operational flexibility. In FY '25, we delivered our highest annual revenue of INR 150,725 crore and its second highest EBITDA of INR 43,542 crore. We also made progress on our $9.5 billion capital expenditure program with $5.5 billion already spent, including $1.5 billion in FY '25. The remaining $4 billion will be invested within the next 3 years, supporting our strategic projects on volume expansion and backward integration.

So in conclusion, Vedanta 2.0 is about our new vision for growth, governance and stakeholder interest. We are transforming the company into a global leader in critical minerals, energy and technology and ensuring long-term value creation for all stakeholders. This exciting transformation will redefine Vedanta's position on the global stage and position us as a key player in the industry of the future. Thank you. I now hand over to Arun.

[Arun Misra, executive]

Thank you, Deshnee. Good evening, everyone. As we initiate our journey on Vedanta 2.0, it gives me immense pleasure to share with you the performance of the year that has gone by and reflect upon some of the key milestones that demonstrate the strong foundations on which the Vedanta Group stands today. I'm happy to say that Vedanta has delivered the highest annual revenue in its history of INR 150,725 crores, up 10% year-on-year. We also reported our second highest EBITDA of INR 43,541 crores, up 37% year-on-year, reflecting strong operational performance. I am pleased to highlight that our key businesses, aluminium and zinc have continued to maintain their cost leadership positions on the global cost curves, reinforcing our competitive strength in the industry despite the volatility of global commodity markets.

Now let me share some individual business specific insights starting with the aluminium business. The aluminium business has achieved its highest ever annual metal production of INR 2,422 kt thereby surpassing our volume guidance for FY '25. In quarter 4, the business delivered an all-time high quarterly volume of value-added production of 338 kt, implying 16% year-on-year growth which has translated into best ever net effective premium of around $300 per tonne.

On the cost side, the business achieved hot metal production costs, excluding alumina at $920 per tonne, which is the lowest in last 4 years.

Our total cost of production inclusive of alumina saw an increase due to the carry forward of a high-cost alumina inventory from the previous quarter. The benefit of softening of the global alumina prices will be reflected in the cost of production numbers of Q1 and Q2 of FY '26. The EBITDA margin per tonne of our aluminium business in quarter 4 jumped 47% year-on-year to USD 880 per tonne.

Moving to Zinc India. We achieved 310,000 tonnes of mined metal production and 270,000 tonnes of refined metal production in quarter 4, which enabled us to deliver highest ever annual mine metal production of 1.095 million tonnes and refined metal production of 1.052 million tonnes this year. The production cost of the quarter stood at $994 per ton which is 5% year-on-year improvement. We surpassed 13.1 million tonnes of available metal reserves for the first time since underground transition.

In our Zinc International business, overall volume increased 52% year-on-year and 9% quarter-on-quarter to 50,000 tonnes. Our Gamsberg mines delivered a strong 89% year-on-year and 15% quarter-on-quarter increase in MIC production of 41,000 tonnes. We are currently producing at a monthly run rate of 18,000 tonnes with continued improvement in mining performance and ore availability, we are confident to achieve our production guidance of 235,000 to 265,000 tonnes. On the cost side, we achieved our guidance of $1,300 per tonne on a full year basis driven by higher and efficient production and lower TcRc.

Talking about oil and gas business, quarter 4 production stood at 96.2 kboepd impacted by natural decline in MBA Fields & offshore blocks. We drilled 10 infill wells across the Saraswati and Aishwarya fields in quarter 4 FY '25 thereby taking the total count of infill wells to 28. I am pleased to note that even managed to acquire 7 of the 28 blocks in the latest round of OALP auctions taking our total portfolio to 63 blocks, spanning 73,000 square kilometers. Our iron ore business has seen a strong increase in quarterly production, rising 24% year-on-year and 40% quarter-on-quarter, driven by steady ramp-up of Bicholim mine operation in Goa.

Now let me provide an update on our key growth projects. Starting with aluminium, we are on track to commissioning the Lanjigarh Refinery Train-2 with the first metal production from the Train targeted in the current quarter.

The BALCO smelter expansion of 435,000 tonnes per annum is in advanced stage and with the commissioning targeted in the first half of the current financial year. At Zinc India, our 160,000 tonnes per annum roaster at Debari will be commissioned in the current quarter and 510,000 tonnes per annum fertilizer plant in quarter 4 of this current fiscal year.

At Zinc International, our Phase 2 expansion project is targeting commissioning in the second half of the current fiscal year. In our Merchant Power business, 300-megawatt of Meenakshi power plant is now commissioned. The remaining 700-megawatt capacity is targeted for commissioning in the first half of this current fiscal year. The Unit 1 of Athena power plant is also scheduled for commissioning in first half of this fiscal year, while the Unit 2 is expected to start operation in March '26.

Speaking about our ESL facility, we are expecting total hot metal capacity to increase from 1.7 million tonnes to 3.2 million tonnes per annum by FY '26 end with plans to further debottlenecking to 3.5 million tonnes per annum in FY '27.

In conclusion, we have delivered an outstanding quarter 4 performance and ended the year on a high note where we not only delivered the highest ever annual volumes for aluminium and zinc, but also drove down the cost of production significantly, reaching a 4-year low cost in Zinc India, and ex alumina cost of production at our aluminium business.

Looking ahead, we believe that FY '26 holds tremendous potential for Vedanta, the completion of key growth and integration projects will continue to drive our volumes and margins. We are confident of continuing to create long-term value for all our stakeholders.

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 pleased to share that this year have achieved a significant milestone with our highest ever annual revenue crossing INR 1.5 lakh crores. In addition, we have also delivered our second highest EBITDA of INR 43,541 crores driven by structural changes in operations and strategic initiatives with a strong domestic demand. This performance is further supplemented by key corporate actions that have significant [indiscernible] in our balance sheet and capital structure position.

Coming to fourth quarter FY '25, I'm pleased to share that we have delivered our highest ever quarterly revenue of INR 39,789 crores, up 14% Y-o-Y. EBITDA reached INR 11,618 crores, reflecting an impressive 30% growth Y-o-Y.

EBITDA margin increased to 35%, which is highest in last 12 quarters, representing a surge of 465 basis points Y-o-Y. PAT of INR 4,961 crores, marking an exceptional growth of 118% Y-o-Y.

Now coming to highlights for the full year. Annual revenue is up 10% Y-o-Y and EBITDA is up 37% Y-o-Y with EBITDA margin of 34%. This Y-o-Y comparison focuses on core performance and excludes onetime gain from cairn arbitration that we recorded last year. Our PAT for the full fiscal stands at INR 20,535 crores, marking a remarkable increase of 172% growth Y-o-Y. And finally, ROCE at about 27% with a 371 basis point improvement Y-o-Y.

Turning to our balance sheet. And as on March 2025, our net debt stands at INR 53,251 crores, which represents a decrease of more than INR 3,000 crores Y-o-Y. This reduction is primarily attributable to cash from operations, at the same time, various actions that took last year, for example, the QIP or offer for sale for zinc shares, which has been partly offset by CapEx growth and sustaining, at the same time, rewarding our shareholders through dividend.

Additionally, we also maintained our maturity of debt, which is more than 3 years. This quarter also witnessed significant improvement in our net debt-to-EBITDA ratio, which has improved to 1.2x as compared to 1.5x in FY '24. reflecting effective debt management and much more strengthened financial position. And finally, we ended the year with a strong liquidity position of INR 20,602 crores, representing a 34% increase Y-o-Y.

On demerger, I would like to share that following a favorable voting from shareholders and the creditors in the meeting held on 18th of February 2025, we have moved to second motion petition before NCLT, seeking Terminal's approval to proceed on demerger. We anticipate completing the demerger by September 2025.

Quickly in terms of corporate actions and deleveraging. Vedanta, you may have noted last year has firmly established itself as one of the most proactive companies in terms of executing strategic corporate actions. This year, we witnessed a number of such actions, including INR 8,500 crores via QIP, INR 3,150 crores via OFS for Zinc shares, INR 0.5 billion through equity partnership at our parent company, Vedanta Resources and also refinancing INR 3.1 billion bond portfolio for parent company at lower cost, longer maturities and much congenial terms and conditions. All these actions have supported us in achieving a deleveraging of INR 1.2 billion at group level, out of which INR 0.7 billion at the parent company, VRL and INR 0.5 billion at Vedanta India VEDL. As a result, the debt of our parent company, VRL, has decreased to $5 billion, which is the lowest in a decade. And the leverage at group level has improved to 2x from 2.7x a year ago.

With this progress, both Vedanta Limited and its parent entity now maintains a strong level position than most of our key global peers. Furthermore, the credit rating has also seen substantial improvement last year. Both CRISIL and ICRA have augmented the VEDL rating to AA from AA- and VRL, our parent company, has seen an impressive 3-notch improvement, reaching B+ from CCC+ by S&P.

In conclusion, FY '25 has been a landmark year for Vedanta, driven by operational excellence, disciplined capital management and timely strategic initiatives. These actions yielded returns for shareholders and established Vedanta as a major wealth creator in India for FY '25. As we usher into FY '26, we do so with renewed energy and strategic clarity. Our focus will remain sharp on scaling up volumes, unlocking further cost opportunities, fast-tracking high-impact growth projects and executing the demerger to unlock long-term value. And with these changes, Vedanta 2.0 is not just a new chapter. It is a fundamentally transformed enterprise. Thank you. And now I will hand over to moderator for any Q&A.

[Operator]

[Operator Instructions] We'll take our first question from the line of Ashish Kejriwal from Nuvama Wealth Management.

[Ashish Kejriwal, analyst]

Many congratulations for good set of numbers on this. Sir, I have a couple of questions to start with our alumina. So we have been consistently getting somewhat delayed in our ramp-up of alumina plant. Though we have capacity of 3.5 million tonnes but we were running at 2 million tonnes. So my question was, is this based on the guidance which we have given for 3, 3.1 million tonnes for FY '26. Is this based on Sijimali mine coming in or without that also, can we do that? And when can we see this run rate? That's my first question.

[Deshnee Naidoo, executive]

Thank you, Ashish. It's Deshnee. Ashish, I'll start, and then I'll hand over to Sunil to complement. So firstly, actually, to your point, the first 1.5 million tonne train is actually in production. But of course, it does take time to ramp up. So current production is in place, and that's just under 2 million -- 1.8 million to 2 million tonnes and our first 1.5 tonnes is in train. If I look at this past year's performance, as a site, we delivered 1.9 million tonnes of total production.

In terms of your question, and I'll put it into 2 parts, the overall ramp-up is going to be 5 million tonnes. But at the end of this fiscal year for us, we intend to be at an exit run rate of close to 4 million tonnes and the total production for the year will be just over 3 million tonnes. That's taking into account our ramp-up plan. In terms of the 5 million tonnes by FY '27, we hope to be close to those numbers, but to show you the confidence in the process that the team has, we've already started to commission Train 2, and we started to have our first metal [ pump ], Calcine-4 this past month.

Now you asked us about bauxite and how that is linked to what's happening in the ramp-up of the plant, I'm going to hand over to Sunil, but I can tell you that we are working on many plans. Firstly, it includes what do we do with integrated production. But Sunil and the team has a Plan B as well. So Sunil, over to you.

[Sunil Gupta, executive]

Thanks a lot, Deshnee. And thanks Mr. Kejriwal for this question. So as Deshnee has just now said that we are ready for the Lanjigarh refinery. And this year, we are planning to have the production of -- 3.1 million tonnes of production from Lanjigarh. And for that, we have the sufficient bauxite. Your question that Sijimali, whether Sijimali will come and it will not affect our production. We are ready with the Sijimali. We are hopeful that the quarter 3, we are going to start the Sijimali mines.

And even if we slip in the Sijimali, also we have the alternate plan to cover up. So I'm assuring that for want of bauxite, we are not going to lose any alumina production because we have several other domestic sources also. And we have other imported places -- imported bauxite also available from different sources, which we have identified. So for want of bauxite, the alumina production is not going to suffer.

[Ashish Kejriwal, analyst]

But again, we have been definitely talking about that we have the capability to produce, but because of one of the other reasons, we are not able to produce in last 1 half. So out of 3.5 million tonnes, we still are running at 2 million tonne run rate. So I don't know if Sijimali mine does not come in from where we can source bauxite and run the plant at 3 million tonne run rate. So when can we see this run rate, sir? Any quarter?

[Sunil Gupta, executive]

3 million is now we are going in the first -- in the May still we are going to take the 2.6 million, 2.7 million and 3 million by June end, we are going to take the 3 million run rate.

[Ashish Kejriwal, analyst]

Okay. So in second quarter, definitely, we can see 3 million tonnes run rate?

[Sunil Gupta, executive]

Yes.

[Ashish Kejriwal, analyst]

Sorry, ma'am. Yes, please go ahead.

[Deshnee Naidoo, executive]

Ashish maybe -- yes, maybe to simplify it, we need 9 million tonnes of bauxite for a 3 million tonnes in terms of run rate, right for this year. And what Sunil just summarized, we have sources for all of them. Sijimali mine development continues. And for the year, we are looking at just over 1 million tonnes, assuming all the plans go -- or everything goes according to plan, and we start producing by August this year. So -- and the point I want to make is, even when Sijimali comes online with you, we're still going to need other sources of the bauxite.

[Ashish Kejriwal, analyst]

That's helpful. Second question is on our demerger only because what we understand is that we need to transfer mining lease also to different companies. And then only we can have our merger complete because remember in 2010, '11, when Sesa Goa and Sterlite were there, we need to reverse merge with Sesa because mining transfer was an issue. Now here, we are seeing that Sijimali mine bauxite mine as well as coal mines that are under Vedanta Limited level. And now we have to transfer it to Vedanta Aluminium. So do you think that first we have to transfer or sign the mining lease under Vedanta Limited and then we have to transfer to Vedanta Aluminium. And after that, only we can complete our demerger plan? Or am I missing something?

[Deshnee Naidoo, executive]

Ashish, you are right. This is part of the overall approval that we have in our site. So of course, the process is happening right now in NCLT is to improve the overall scheme, but the team had a detailed approvals plan, including all of the mining licenses that will start being approved. In fact, have already started the process. We are still confident with all of the processes that are happening in parallel to complete the process by September '25.

[Ashish Kejriwal, analyst]

Sure. And lastly, we have been committing that we are going to reduce Vedanta Resources debt by around $3 billion. And out of that $2 billion, we have already paid, that's very commendable. Going forward, if I look at the repayment schedule, it seems that next 4 years, we have to repay something like $2 billion.

So my question is whether this entire debt we are going to repay or part of it, we are going to refinance also because for next 4 years, we have a repayment schedule of just $2 billion. And in that question only, I hope that brand fee is still 3% of stand-alone revenue and which is continuing till then.

[Ajay Goel, executive]

Yes, that's correct, Ashish, here. So you're right, you have witnessed over the last couple of years, the entire path of deleveraging at Vedanta Resources. At the same time, the entire $3.1 billion worth of bonds getting refinanced, it also flattens the maturity curve. And in the last bond refinancing, the maturity is as long as more than 8 years. That means less cash requirement at Vedanta Resources.

Now let us look at FY '26, the ongoing fiscal year. The total loan maturities is about $920 million. And if you also add the interest cost, $0.5 billion or $550 million, total cash requirement at Vedanta Resources in the current year is about $1.4 billion to $1.5 billion. This number used to be almost double in the years just gone by.

Now against $1.5 billion of the cash requirement, what are the sources? So brand fee, you're right, it remains 3%. That number is almost $400 million in the current year, which has already been paid contractually as we do in the first month for the fiscal.

The second source of cash is dividend. Even if you pay a normalized dividend with about 6% yield, that amount will be almost $800 million received at Vedanta Resources. So $400 million brand fee, $0.8 billion is a dividend is $1.2 billion and that leaves only a small delta of almost $270-odd million that always can be refinanced.

So overall, by paying almost half the dividend than the recent average, we can deleverage Vedanta Resources by $600 million in the current fiscal. So our overall target of reaching to $3 billion debt in 2 years remains intact. It will be mostly through operating free cash flows at the same time without leveraging Vedanta India.

[Ashish Kejriwal, analyst]

Thanks Ajay. My only question was because for next 4 years, our repayment schedule suggests a $2 billion debt repayment only. So we don't need to refi actually or if we refi only for lower interest cost, then that's a different issue.

[Arun Misra, executive]

Yes, Ashish, given that there is a big queue of people. Yes, I'll take it offline with you after this call.

[Operator]

We'll take our next question from the line of Amit Lahoti from Emkay.

[Amit Lahoti, analyst]

Given that bauxite and alumina prices have come down significantly, how do we think about the benefit in terms of cost of production in FY '26 from the current cost of $2,000 per tonne. I have seen the guidance, but if you can basically walk me down to how do we reach there? So that's my first question.

[Deshnee Naidoo, executive]

Thank you, Amit. I'm going to hand over to Anup.

[Anup Agarwal, executive]

Thank you, Deshnee. And Amit, to your question, quarter 4, we did a cost of $2,000, and you can see alumina was somewhere around closer to $1,100. This is already covered and also mentioned by Sunil Ji that given that we are targeting Lanjigarh at 3 million-ton annual production. And in the first quarter itself, we are looking at doing around 55% of our alumina requirement from our captive sources. So this is one in the second with the imported prices coming down from the level that we are closer to 800 to where we are now 400, 350.

You will see that around $225 to $250 cost we optimized in quarter 1.

Now coming with the power cost, if you would have observed last few quarters. Okay. We have done substantially both in terms of gold prices, gold materialization, logistics in terms of improving the rate coefficient and improving our power plant P&L. So we expect another $40, $45 coming from the power cost. We are seeing a small headwind in terms of carbon. But net-net, we see very clearly the cost coming down closer to maybe the guidance that we have given maybe [indiscernible] upper side even in quarter 1.

Amit, hopefully, I answered your question.

[Amit Lahoti, analyst]

Yes, sure. And my second question is on the updated time lines of Sijimali and coal mines commissioning. So I sense that there has been some delay in Sijimali because in the last quarter, it was supposed to be commissioned in Q2 of FY '26 and now it seems to have moved to Q3. So that is one. And then if you can outline the coal mine commissioning time line?

[Sunil Gupta, executive]

I think for the Sijimali mines, we have already completed the land acquisition, 97% land acquisition is there. We are almost on the last leg of the [indiscernible] first one. And if you ask me the EC, EC already, we are-- we have reported the EC. We are targeting that we are going to get the EC in June 2025, so we are hopeful that we are going to commence the operation of Sijimali mines by quarter 2 FY '26. This is what for the Sijimali mine.

Coming to the coal mines, the Kuraloi mines, which we have said in the quarter 3 FY '26, we are going to come into operation. And for the -- our Bagarpali coal mine, we are expected that we are going to commence the operation from last quarter of FY '26.

[Deshnee Naidoo, executive]

Thank you, Sunil. And Amit, just to confirm the Sijimali time line is still the time line that we are committed to in the previous reporting period of first or the second quarter FY '26 and full ramp up by the fourth quarter FY '26. So no changes.

[Operator]

We'll take our next question from the line of Aditya Welekar from Axis Securities.

[Aditya Welekar, analyst]

I just want to know what is the currently, what is the sourcing mix for bauxite and alumina in terms of captive and third party? And once Sijimali mine comes online, how that mix will change?

[Deshnee Naidoo, executive]

Anup, I think this is an extension of the previous question. Anup?

[Anup Agarwal, executive]

Thank you, Deshnee. And Aditya, see I alimuna have already covered. In quarter 1, we are seeing 55% of the alimuna coming from our captive resources with the balance imported. And as you ramp up, you will see that as we go into the quarter 4, and we reach production capacity closer to 4 million tonnes, 65% of it will be captive and the balance will be imported.

Now coming to bauxite. See bauxite will be divided into 2 parts, one in the H1 when we don't have Sijimali and then the H2. So 60% of the bauxite, we have secured through domestic sources, OMC and other domestic sources and the balance in H1 is primarily imported and in H2, it will be domestic, sourced and Sijimali. Aditya hopefully I have answered your questions?

[Aditya Welekar, analyst]

Yes. Yes. Thanks for that. The second is on the conversion cost in this quarter, we can see on a sequential basis, the conversion cost for aluminium has dropped sharply. So in the previous quarter, it was $107 per tonne, which has come down to $49 per tonne this quarter. And this looks structural in nature. So is it sustainable going forward?

[Anup Agarwal, executive]

So Aditya, you're right in picking up this. Out of this $40 is a onetime cost, which is due to recovery of some old deals and write-backs. So that is not structural. Balance, yes, it's structural, maybe $10, $15.

[Operator]

We'll take our next question from the line of Indrajit Agarwal from CLSA.

[Indrajit Agarwal, analyst]

My first question is on hedging. What are our current hedging positions that we have across minerals?

[Ajay Goel, executive]

I mean over the last couple of years, we have been actively tracking and participating in the hedging program. And even in the current year, when the pricing has been a bit of volatile as the year begin, this area is under active consideration. So hedging position for the current fiscal is mostly in aluminium. So almost our annual volumes, 12%, almost 275 kt has been already hedged and the hedging rate is $2655 per tonne. Secondly, in case of Zinc International, a small quantity, 50 kt is already hedged. It's almost $2840 per tonne. But in summary, we are watching this area very closely and we will sake the positions as market moves.

[Indrajit Agarwal, analyst]

Sure. This is helpful. Also, if you recall, in last year's Investor Day, you had highlighted 2 EBITDA targets, $5 billion for -- sorry, $6 billion or '25 and $7.5 billion for '27. While we have fallen short of FY '25 despite commodity prices being resilient or robust, how confident are we of the '27 target of $7.5 billion?

[Ajay Goel, executive]

Last year, we guided -- historically, our guidance has been, Indrajit, around volume, cost and CapEx. And EBITDA guidance during our conversation was about $6 billion. So against INR 6 billion, it was at the group level. So we are above $5.5 billion. There is some gap and -- but not miles apart.

In the current year, if you look at one page in the IR document, it talks about the guidance again on the volume, cost and CapEx. We aren't guiding for now for EBITDA. And as pricing stabilizes, we may guide on EBITDA as well. But important thing to note, if you look at the guidance, the volume at the mid part of the guidance is about 10% growth versus last year.

Cost again from the midpoint is about against 9% and 1%, 1.5% is anything. Net-net, in FY '26, we are foreseeing 20% growth led by operations, which is volume, cost and NEP. Now even with the current pricing, current spot, our EBITDA with these numbers will be far bigger than the last year. And as I mentioned, as pricing stabilizes, if you see 10th or 11th of April, post tariff, the pricing and right now, pricing across zinc, aluminium and the Brent has recovered by 5%. So one should look at the growth led by volume, cost and NEP. Pricing, we have to wait and watch.

[Deshnee Naidoo, executive]

I think Indrajit, just to add to that. On aluminium, as we've just been discussing, we would have been shy of our cost numbers because of the spike in alumina prices that we saw globally last year, and that contributed to not beating the internal or the EBITDA number. Similarly, on Hindustan Zinc slightly shy of the metal that we would have liked to produce despite the good efforts that Arun and the team have made in terms of their mining tonnes. And Zinc International, I think when Chris talks, it's good to see where we ended the year, but we did fall short of our targets in terms of production in the first half because we chose to catch up on our mining tons. So those were, I would say, the levers that Ajay just spoke about. Those were the reasons why we were slightly shy of our -- of hitting our EBITDA numbers against the improved LME profiles.

[Indrajit Agarwal, analyst]

And lastly, how is Konkona copper mine ramping up? And any plans of getting it into moving into India entity yet?

[Deshnee Naidoo, executive]

Thank you for that. I'm going to hand over to Chris to talk about our very exciting copper growth story in Zambia. Chris?

[Christopher Griffith, executive]

Deshnee, thanks very much, and thanks for the question. Yes, so I think we're making very good progress in the ramp-up of KCM. Remember, we only got the mine back in August, started production in September. And we've ramped up KCM to about 45,000 tonnes of integrated copper, of which about just under 30,000 tonnes was from our own production and 17,000 tonnes from the custom production. So we're ramping up very nicely.

I think this year, and we'll give some updated guidance, I guess, Deshnee, in the next call. But previously, we said when we gave market guidance in October, we said that we'll do about 150,000 tonnes of copper in 2026. I'm very pleased to say that we're on track to deliver that and probably a bit more. So as I said, we'll probably give you more updated guidance, but the ramp-up of KCM is going really well. We'll be above the 150,000 tonnes, probably closer to sort of 170,000, 180,000 tonnes. But that's not the guidance for now, but just to let you know what that ramp-up is looking like.

So overall, on this amazing KCM assets, this year, we'll see a ramp-up. We will be cash positive this year, starting to make money, investing in the business, starting to invest in the new capital to complete the KDMP project. to ramp up to 300,000 tonnes. So I think overall, this great asset is ramping up nicely now that we've got the assets completely back in our own hands. And the investment that we've committed to the government of Zambia of $1 billion over 5 years is very much on track, and we'll probably invest just over $300 million for this financial year, both in some fixed and some growth, but also in the major completion projects of KDMP. Yes. So overall going quite nicely in the ramp-up.

[Ajay Goel, executive]

Yes. The second part of the question was regarding any plans of bringing KCM to India entity. So right now, as Chris mentioned, our focus, rightfully so remains in [ operationalization ] and augmenting the volume at KCM. And in terms of any restructuring, restructuring right now, not under active consideration. That may happen in fullness of time, not right now.

[Operator]

We'll take our next question from the line of Ritesh Shah from Investec.

[Ritesh Shah, analyst]

A couple of questions. First one for Deshnee. I was surprised to see basically copper smelter specific to Saudi Arabia not there on the CapEx sheet. Any specific reasons over here? And at the current TcRc if we had to go ahead with the project, how would we look to justify the underlying economics?

[Deshnee Naidoo, executive]

Okay. I'll start, and I'll hand over to Chris actually to support. So we have signed the MOU. And of course, we are still in the study phase, looking at the options. Once we've concluded and have a final feasibility study with us, that's when we will actually indicate the capital amount. And maybe I'll hand over to Chris to talk about the progress of the study. Chris?

[Christopher Griffith, executive]

Yes. Thanks, Deshnee, and thanks, Ritesh, for the question. Yes. Look, I think Deshnee was correct in saying, look, we've signed the MOU. So it's still very, very early days. We have done a high-level feasibility study that we're in discussions with the government of Saudi. And there's a whole range of enablers that are part of the package of investing in Saudi. And it's currently those enablers that we're discussing. So what long-term loans, what grants, what other duty protections and the like.

So there's a whole package of enablers that we're currently in discussions with the government of Saudi. And depending on how those go will depend on sort of how the project may progress or not. So I think just very early days, signed the MOU, project looks interesting. Saudi looks very interesting. The governments are very supportive and are trying to attract all this investment to Saudi. And it's on the basis of those enablers that we're in discussions with governments at the moment. But I guess it's still very early days and still some, I guess, large yards still have to be covered before we can commit to any capital for that project.

[Deshnee Naidoo, executive]

And maybe, Ritesh, just to add -- I mean -- sorry, Ritesh, just to add, we would have put a little bit of study money into the growth capital category under others, and that's in our guidance of about $1.5 billion to $1.7 billion. So there is some money in there under others pertaining to study cost.

[Ritesh Shah, analyst]

My second question is for Ajay. Sir, you indicated $600 million of reduction in leverage at VRL. I understood the bridge of $1.5 billion is the ask and then basically you explained $400 million, $800 million which was brand fee and dividends, leaving the balance $270 million. So I was not able to reconcile the $600 million number, sir.

[Ajay Goel, executive]

Okay. So if you look at the source of cash at Vedanta Resources, I say the brand fee is $400 million. And dividend, if we assume 6% yield, which is less than half of the recent past, so it is $800 million. So $400 million plus $800 million is $1.2 billion. Against $1.2 billion, the interest cost is $550 million. And if you also add $650 million for other expenses, $600 million. So $600 million is expenses, $1.2 billion is a source of cash. That means deleveraging of $0.6 billion in current year.

[Ritesh Shah, analyst]

I couldn't comprehend still.

[Ajay Goel, executive]

Maybe in that case, Ritesh, I will talk to you maybe offline.

[Charanjit Singh, executive]

Ritesh, I will take it offline with you after the call. Charanjit here.

[Ritesh Shah, analyst]

Sure, sure. And just last 2 questions, specifically on Meenakshi and Athena, is it possible to highlight what the coal sourcing is and if at all, we have signed any PPAs for both assets separately? And the last one was on bauxite. What is the rate at which we are procuring bauxite from OMC? And I read the annual report, I find the rate of almost INR 1,000 per tonne, which looks too low. Is there anything I miss over here, if you could just clarify on that?

[Arun Misra, executive]

So Ritesh, I'll take the power and will let Anup take the bauxite query. See we haven't signed any PPA as of now. But the first year, it will be all merchant power, short-term contracts. So I think we will sign for both the SSA first, and then we will go for the PPA, more of a medium-term PPA. But if you look at the rates in the merchant power market today, you will get very good rates. So at least for 1 year, our model will be more like going for the merchant power contracts.

[Ritesh Shah, analyst]

Sure. And bauxite costing, specifically from OMC?

[Anup Agarwal, executive]

So Ritesh, so to your question on the bauxite OMC, the cost that you mentioned, that's only the basic cost and then the taxes, duties and the logistics costs are all extra.

[Ritesh Shah, analyst]

Right. But still INR 1,000 is way too low because if you look at the e-auction prices, the numbers are significantly higher. So I understand it will be ex mine and everything else will be extra. So is there anything which has baked in contingent liability that we should be aware of? Or is this the pricing that we have that Vedanta as a group has from OMC?

[Anup Agarwal, executive]

See, this is the price which is there today. Of course, there is a small litigation going around it, but this is the price which is there today.

[Ritesh Shah, analyst]

Okay. So there's no risk of contingent liability over here, just a clarification.

[Anup Agarwal, executive]

Not as of now. There is nothing as of now.

[Operator]

We'll take next question from the line of Pallav Agarwal from Antique Stock Broking.

[Pallav Agarwal, analyst]

So a related question on the alumina cost because currently market prices around $50 per tonne and our cost of production at Lanjigarh also seems to be either in that range or a little higher. So once probably the captive bauxite starts, what sort of cost reduction are we looking at compared to the current cost of production?

[Deshnee Naidoo, executive]

So I am going to get Anup to answer that because it is the extension of the same question, Anup?

[Anup Agarwal, executive]

So yes. So Lanjigarh cost, if you would have seen in quarter 4, we did a cost of around $370. Now it is 2 factors. One, the bauxite sourcing -- the bauxite that we're getting from the domestic source versus the imported source. So part of it is to do with that. And the part of it is to do with the volume. Going forward, as we ramp up our production in quarter 1, we expect this cost to be somewhere around $340, $350.

Now coming to your question on what the API or the imported bauxite cost, those are all the ex works cost, the $350 or the $400 that we saw in the month of March and April. And then you have a $60, $70 on top of it. So at this point of time also in quarter 1, we expect our cost to be $35 to $50 lower compared to even the API that we are seeing in the month of April.

[Pallav Agarwal, analyst]

So this is the API landed cost you're seeing comparing with that?

[Ajay Goel, executive]

Landed cost, yes.

[Pallav Agarwal, analyst]

Other question is again on the Athena power plant. So when I look at the CapEx slide, so there's still a significant amount of unspent CapEx over there. So how confident are we of really starting that asset during this year and achieving the targeted PLF?

[Arun Misra, executive]

No. So don't equate between the CapEx spend and actual commissioning of the power plant. Athena first part is commissioned and next 700 megawatts will be commissioned this year. So absolutely, there is no concern on that, though.

[Deshnee Naidoo, executive]

So just to confirm, Athena Unit 1, 600 megawatts is already -- it's being scheduled for commissioning right now, quarter 1. And the second unit is another 600 megawatts that's been scheduled for commissioning in quarter 4 of this financial year.

[Pallav Agarwal, analyst]

So any broad guidance on what type of profitability we can expect from that plant?

[Ajay Goel, executive]

Can you repeat, please?

[Pallav Agarwal, analyst]

No, any broad guidance on what profitability we can expect from the Athena power plant?

[Ajay Goel, executive]

So we are targeting roughly around INR 2 a unit in terms of the EBITDA level. Our generation cost is likely to be closer to INR 3.50, which will be, let's say, INR 3 for the variable cost of coal and INR 0.50 on the fixed side. And with respect to what we are likely to get in the merchant power market is minimum of INR 5.5 to INR 6.

So if you look into the current prices in the merchant power market, for the contracts what we have for Meenakshi, we are in position to generate per unit more than INR 6.5 at this moment. And for the deficit period, when the power picks up in the summer, we also have some contracts, though for a small quantity from Meenakshi signed for INR 10 a unit. So the current profitability in the merchant power market is very good and also the reason that we, at least for 12 months, will take this route versus going for a long-term or medium-term PPA.

Does that answer your question?

[Operator]

We'll take our next question from the line of Amit Dixit from ICICI Securities.

[Amit Dixit, analyst]

Congratulations for a good performance. A couple of questions from my side. The first one is essentially on value-added products in aluminum. If I look at this year, it works to around 14%. Now given our production is going to increase to roughly 3 million tonnes at the lower end of the guidance, what kind of value-added proportion in terms of percentage can we expect for FY '26?

[Deshnee Naidoo, executive]

Yes, Anup, please.

[Anup Agarwal, executive]

So Amit, so this year, you can see we have done closer to 50%. And next year, we expect it to be somewhere around 70% as we ramp up the balance facilities both at BALCO and Jharsuguda.

[Amit Dixit, analyst]

Sorry, what did you say 17, 1 7 or...

[Anup Agarwal, executive]

Amit 7 0, 70%.

[Amit Dixit, analyst]

70%. So that means the premium that we have in this quarter, I mean, which is quite impressive at 301, that premium number should actually go up as we go ahead for aluminum?

[Anup Agarwal, executive]

Yes. So Amit, so there are 2 positives. One, as you rightly picked up, is on the value-added percentage. The second is on the domestic side, both of which we are seeing rise quarter-on-quarter. But there are some small headwinds also which we should keep in mind. Row [indiscernible] on SEZ has gone away, while that's an advocacy topic and we are taking it up with the government, that's gone away. It takes away around $20.

And this lower LME and some lower indices that we are seeing in the market, that takes away another $30. So net-net, if you look at FY '25, we are seeing an increase of $25 to $30. It could have been more, but for the Row [indiscernible] and the lower LME of the indices that I mentioned.

[Amit Dixit, analyst]

Okay. Got it. Got it. The second question is on oil and gas. So the guidance is 95 to 100 kboepd. Now we closed the quarter at around 96. So are we expecting an uptick in oil production possibly from whatever endeavors we have done over a period of time? And if so, from which quarter we can expect that? And also, if you could give an indication of OALP percentage in the total production in this year, FY '26?

[Deshnee Naidoo, executive]

Thank you. Amit, I'm actually going to hand over to Hitesh. Hitesh over to you.

[Hitesh Vaid, executive]

Amit, yes, you rightly pointed out, our current year number was around 104, and we have guided next year 195 to 100, while our quarter 4 number is at around 396. Now the first part is some of the things which we built during this year is primarily driven by some of the failures which we had in our Mangala wells. Those failures are now behind us, and that's why now quarter-on-quarter at least we are seeing a stable volume compared to what we had seen earlier during the first half of the financial year.

Now going forward, what will work for us, how do we assure to deliver our guided volumes for FY '26. I think one of the key factor would be our ability to manage the declines where we -- as I said, last few quarters or few -- couple of quarters, we have done well. Second is we have drilled quite a number of wells during the last 6, 8 months. Those are being ramped up progressively, which will add around, say, 7,000 to 8,000 of incremental volume for us.

Additionally, we are still drilling wells, both in gas field as well as the oil field, which we expect to add around 5,000 incrementally more. The third part, which is one of the biggest driver for Cairn going forward on volume is our ASP project. As we said earlier, we have commenced new injection in select pads. Now for the larger cluster of pads, we are almost ready to inject. We will do the first injection in a larger cluster around July of 2025. And that injection would take around, say, 5 to 6 months to give us the volume upside, and we'll start seeing the impact of that injection. And of course, once we see the benefits, say, around end of December, we would obviously extend the ASP project to all the clusters in Mangala and then, of course, in Bhagyam and Aishwarya field as well.

So these are some of the key things which we are doing as far as Rajasthan field is concerned, not only to continue decline, but help it to grow, especially through drilling more wells and ASP project.

In addition, during the second half of the year, we are also drilling infill wells, both on the East Coast and the West Coast, given the weather window available after monsoon. During that time, what we'll also do is one of our DSF field Ambe, which is offshore West Coast, just near to our current producing Cambay field. So we'll drill 3 wells there as well, which will add volumes, but it will take around 18 months further down the year to come into play.

It will -- but it will add substantial volumes. It will be a new field, which will give us around 15,000 barrels of production. Now the important part, which you said is around the time line. We expect that our volume trajectory will go up from Q2 onwards. We will be at around 98, 99 in this Q1. And then, of course, the trajectory goes up, and we have a higher volume during Q3 and Q4 when we start the play of infill wells in offshore as well as the benefit of ASP. Again, I think beyond this, some of the few things for us, I think, came beyond the current volume is what we are doing to grow our volume. And that is more importantly driven by the robust portfolio, which we now have on the exploration site.

And recently, we have said that we are starting the shale drilling campaign in Rajasthan. So the well gets spud in July of this year. And we'll do 3 wells and we'll get to know how it works out for us. How are we able to make them -- make it economical and then we'll come out based on the results on the full field implementation.

In Northeast, we have got first oil discovery in our OALP block, what we have now named as Rudra, and we are doing a couple of appraisal wells starting next month, which will then give us volumes later during the year from Northeast as well. The deepwater project is anyway going ahead. We are acquiring data through a CSEM survey. We'll have the results somewhere in July, August, and then we will lock in the rigs for next year drilling. So these are some of the key things which will give us larger volume going forward. But I think in the near term, focus is on managing decline, growing the volume, ensuring that we meet our guidance.

The other part, I think, which you asked importantly is how much volume is being contributed through our OALP blocks? Currently, there's around roughly 4%. And I think our now focus is also on larger volumes through the OALP as well as the DSF fields because towards EBITDA, they contribute disproportionately much more compared to the volume they contribute. So I think that is one of the focus changes. So that's all from my side. If you have any questions, let me know.

[Amit Dixit, analyst]

So any indication you will give on OLP proportion, it was 4% in FY '25. For FY '26, how much can we expect? The broad range will also do?

[Hitesh Vaid, executive]

Correct. So what we are working on is trying to figure out whether we can reach around 8% to 10% by Q4. It will depend upon our current Jaya producing field. We are drilling a couple of more wells in May. They are more appraisal exploration led. And then Northeast, which I said we have got the discovery and we are looking to monetize during this year. If both of these work, then it will be 10%. And the other part, the DSF, which I said where Ambe we are drilling the well, but it takes time to -- since it's a new offshore development, - we'll have to build the platform, connect the pipeline. So it will take 18 months, but I think the objective is to move to that 20%, 25% in at least 18 to 24 months.

[Operator]

We'll take our next question from the line of Raashi Chopra from Citigroup.

[Raashi Chopra, analyst]

Sorry, these questions might be repetitive because I got my call dropped. So just on the aluminium side, again, just to clarify, the BALCO has gotten delayed to the first half, the BALCO expansion. Is that correct, from the first quarter?

[Ajay Goel, executive]

Anup, you want to take it?

[Anup Agarwal, executive]

So Raashi, we are still maintaining the guidance of first metal at end of the quarter 1. So to that extent, while we said that the first half, but we are still maintaining the guidance that by quarter end, June end, we should have the first metal from BALCO.

[Raashi Chopra, analyst]

Okay. And then the alumina 3.5 million tonnes to 5 million tonnes, that is in progress already?

[Deshnee Naidoo, executive]

That is correct. Yes. That is correct, Raashi, that is in progress. So the team is currently -- they have commissioned the first 1.5 million tonne train. And on the second train, we started to commission. In fact, we've had metal from Calcine 4 already. And by the end of this year, we are targeting to be at a run rate closer to 4 million tonnes. And by next year, we will hit our 5 million tonne run rate.

So that's how we're looking at our Lanjigarh refinery. I think just to also add to the BALCO expansion, I also want to give the team credit here because when we started the project, the team has since actually done continuous improvement on a project model, which again, I think is great given all of the expertise that we uniquely have in this field. And we've actually added to the capacity, and we've reduced, I think, the specific power consumption by about 2.5% and 3%. And they've also made some changes to the cathode block.

So that has caused some delay upfront in terms of order placement and the team is now catching up on that. So that is why we're still holding to the overall time lines. But the comfort for everyone is that we are building a far more improved project in BALCO.

[Raashi Chopra, analyst]

Okay. And then just on the coal blocks, again, if you could just kind of give the time lines for all 3 again, please.

[Ajay Goel, executive]

Raashi, I think we have answered this. So good if you we connect offline in the interest of the time, we are already 8 minutes behind the scheduled time. So I think this will be the last question, but I'm happy to connect with you because this was already answered on the call while your call dropped.

[Raashi Chopra, analyst]

Okay. No problem. Then just one -- I don't know if this has been answered, but what is the debt repayment at VRL for FY '27?

[Ajay Goel, executive]

Suggest that you look into the slide, we have given the full details in the deck. year-on-year?

[Charanjit Singh, executive]

So maybe I'll take it summarily. Charanjit. So FY -- first with '26 current fiscal, so $920 million is a debt repayment due in the current year. Next year, FY '27, it's about $675 million. So very clearly, the need for cash at VRL, in fact, is declining rapidly, led by both deleveraging and refinancing. At the same time, overall cash flow at Vedanta India, given the augmented volume, compressed cost is much higher. So overall, we, as a group in terms of cash management is at historical best position.

[Operator]

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

[Charanjit Singh, executive]

Thank you, everyone, for taking out the time to join us. I hope most of the questions were answered but for any unanswered questions, feel free to touch base with the IR team. We'll be happy to provide you all the responses and details today itself. So with this, we conclude our call. We look forward to reconnecting with all of you towards July end to discuss our Q1 performance. So good day, and goodbye.

[Operator]

Thank you. On behalf of Vedanta Limited, that concludes this conference. We thank you for your participation, and you may now disconnect your lines. Thank you.