Vedanta Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Record Q3 EBITDA, cost discipline driving the beat: Consolidated EBITDA hit ₹11,284 crore, up 30% YoY, as structural cost initiatives lowered CoP across aluminium, zinc and zinc international while higher output commodity prices lifted revenue.
• Aluminium and zinc are the twin engines: Aluminium EBITDA jumped 58% YoY on record production and premiums, and Zinc India EBITDA rose 28% YoY with a 15-quarter low cost of production.
• Oil & Gas is the visible drag: Production fell 19% YoY to 99.4 kboepd on natural decline, and EBITDA slipped 5% YoY; infill drilling and ASP expansion are the offset but are still in progress.
• The balance sheet is getting stronger, fast: Net debt stood at \$6.7 bn, parent VRL restructured \$3.1 bn of bonds with a 250 bps coupon reduction, and CRISIL upgraded the long-term rating to AA with Watch Developing.
• What to watch next quarter: Whether the demerger vote on 18 February passes smoothly, the pace of the Lanjigarh Train 2 ramp-up, and any stabilization in Oil & Gas production as infill wells come online.

Cost Leadership & Operational Delivery

• Structural cost-out is the margin story: Aluminium CoP ex-alumina hit a 14-quarter low of \$896/t, Zinc India CoP fell to a 15-quarter low of \$1,041/t (down 5% YoY), and Zinc International CoP dropped 31% YoY to \$1,182/t, with Gamsberg recording its lowest-ever quarterly CoP at \$1,002/t.
• Aluminium delivered on all fronts: Highest-ever quarterly metal production at 613 kt (+2% YoY), all-time best quarterly VAP and domestic sales at 317 kt and 302 kt, and a record net ex-pit premium of \$262/t on metal sales.
• Zinc India set multiple records: Highest-ever 9M mined and refined metal production at 784 kt and 783 kt, and a 4-year lowest 9M CoP, though silver production fell on lower fumer output and a mining sequence change at Sindesar Khurd.
• Gamsberg is turning the corner: Quarterly production up 21% YoY, highest-ever monthly total rock mined at 8.1 Mnt in December 2024, and highest monthly zinc recovery at 84.6% in the same month, supporting the Phase 2 expansion target of 2HFY26.
• Steel improved despite a soft demand environment: EBITDA rose 36% YoY to ₹146 cr and margin improved to \$54/t from \$38/t, driven by a better product mix of billets, TMT bars and wire rods, even as overall production fell 3% YoY.

Misra: "We have delivered our highest-ever 3rd Quarter EBITDA of ₹11,284 crore. Our strategic focus on cost optimization and production ramp-up across our key businesses has helped us to continue delivering this outperformance."

Oil & Gas: The Drag and the Fix

• Production decline is steep and structural: Gross operated production fell 19% YoY to 99.4 kboepd, with Rajasthan down 22% YoY to 81.3 kboepd and Cambay down 41% YoY to 4.5 kboepd, as natural decline in MBA fields and offshore blocks outpaced new volumes.
• Realizations also softened: Average oil realization dropped 8% YoY to \$70.1/bbl, tracking Brent's 11% YoY decline to \$74.7/bbl, so the revenue hit was compounded: revenue fell 22% YoY to ₹2,636 cr and EBITDA slipped 5% YoY to ₹1,201 cr.
• The growth response is underway but early-stage: Nine infill wells were drilled across Mangala and Aishwarya fields, the EPC contract for the ASP Cluster C surface facility and PWT was awarded with construction ongoing, and a CSEM survey contract was awarded for the KG Deep Water block.
• OALP is a small bright spot: Production reached 4.0 kboepd vs 1.8 kboepd YoY, though the absolute contribution remains modest relative to the Rajasthan decline.

Balance Sheet & Capital Structure

• Liquidity is abundant: Cash and cash equivalents stood at ₹6,766 crore (up 57% YoY) and total cash at ₹21,138 crore (up 66% YoY), reflecting strong operating cash generation.
• Parent-level restructuring de-risks the group: VRL successfully restructured \$3.1 billion through bond issuances over the last four months, extending maturities to up to eight years, improving covenant terms, and cutting the average coupon rate by 250 bps.
• Credit rating is moving in the right direction: CRISIL upgraded the long-term rating from AA- to AA with Watch Developing, and ICRA maintained ICRA AA on Watch with Developing Implications, both reflecting improving credit metrics.
• Net debt is stable at \$6.7 bn (₹57.35k cr), with average term debt maturity maintained at approximately three years, giving management a manageable near-term refinancing runway.

Goel: "This quarter marks a stellar performance, delivering the highest Q3 EBITDA of ₹11,284 crore, a remarkable 30% growth year-on-year, with a robust EBITDA margin of 34%."

Growth Projects & Capacity Expansion

• Aluminium downstream push is accelerating: BALCO doubled its rolled products capacity, making Vedanta Aluminium the second-largest RP producer in India by capacity at 100 KTPA, with an additional 30 KTPA of AlSi and 50 KTPA of slab capacity added; the VAP capacity share rose to 68%, on track toward the 90% target.
• Lanjigarh alumina expansion is imminent: Commissioning of Train 2 of the 1.5 MTPA Lanjigarh expansion project is scheduled for Q4FY25, which will further integrate the aluminium value chain and reduce alumina cost exposure.
• Gamsberg Phase 2 is past the halfway mark: Overall progress reached 63.4%, with project completion targeted in 2HFY26, promising a material step-up in Zinc International's production profile.
• Goa iron ore is back: Iron Ore Goa recorded its first export shipment after the mining restart in October 2024, and saleable ore production at IOB jumped 10% YoY and 17% QoQ, led by Goa mining.
• VAB secured environmental clearance for 1.2 MTPA capacity, clearing a regulatory gate for future steel-related volume growth.

Demerger & Corporate Structure

• The demerger vote is set: A meeting of shareholders and creditors is scheduled for 18 February 2025, and management stated the process is progressing well and remains on track.
• The logic is simplification: The demerger aims to create independent, pure-play entities that can attract sector-specific investors and unlock value, though no new financial details or timelines beyond the February meeting were disclosed on this call.

ESG & Social Commitments

• S&P Global CSA 2024 rankings reinforce the narrative: Vedanta Limited ranked 4th among 248 companies (Top 5%), Hindustan Zinc ranked 1st (Top 1%), and Vedanta Aluminium ranked 2nd (Top 10%), with the group positioned as the world's most sustainable metals and mining company for the second consecutive year.
• Decarbonisation carries a \$5 bn price tag: Management reiterated the commitment to net zero by 2050 or sooner and plans to spend \$5 billion over the next 10 years to accelerate the transition, with 925 MW of renewable energy RTC currently under construction.
• CSR spend is scaling up: The Anil Agarwal Foundation aims to spend ₹5,000 crore over the next five years on social impact programs, with ₹254 crore already spent YTD Q3FY25 across 150+ initiatives and ~6,918 Nand Ghars operational.

Guidance & Commitments

Key Metrics