Ladies and gentlemen, good day, and welcome to Vedanta Limited's Q3 FY 2024 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Prerna, Deputy Head, Investor Relations, Vedanta Limited. Thank you, and over to you, ma'am.
Thank you, Neeraj. Hello, everyone, and welcome to our third quarter of financial year 2024 earnings conference call. I'm Prerna Halwasiya. On behalf of the entire team of Vedanta, I would like to thank you for joining us today to discuss our financial results and business performance. Today, from our leadership team, we have with us Mr. Arun Misra, our Executive Director; Mr. Ajay Goel, our Chief Financial Officer. Then we additionally have Mr. Ajay Goel, President, Finance; our Business CFOs, Mr. John Slaven, CEO, Aluminum Business; Mr. Steve Moore, Deputy CEO, Oil and Gas. Along with him, we also have Mr. Vibhav Agarwal, CEO, Power Vertical; Mr. Chris Griffith, CEO, Base Metals; and Mr. Sunil Gupta, CEO, Vedanta Aluminum, Jharsuguda. Please note that today's entire discussion will be covered by the cautionary statement on slide number 2 of the presentation.
We will start with the update on our operational and financial performance, and then our leadership team will briefly speak about themselves and their vision for the individual businesses. Lastly, we'll open the floor for the Q&A. Now, I would like to hand over the call to Mr. Arun Misra .
Thank you, Prerna. Good evening, everyone. Thank you for joining today's quarterly income update. At the outset, I'm proud to share that Vedanta has been ranked third in S&P Global Corporate Sustainability Assessment 2023 amongst 238 global peers, whereas Vedanta's Hindustan Zinc Limited has been ranked first, depicting our commitment towards ESG growth. Business segment performance. Moving on to the third quarter performance, we delivered improvement in cost of production across business segments, while maintaining positive momentum in volume expansion across businesses. Aluminum and zinc continue to be among the lowest cost producers globally, with the first, that is aluminum, being in first quartile position on global aluminum cost curve and zinc being in the first decile position on global zinc mining cost curve, respectively.
Aluminium delivered highest ever nine-month production of 1.8 million tons, with a cost of production of $1,825 per ton. We delivered approximately $800 million of EBITDA. The business also showcased highest ever quarterly production of 599,000 tons, with increasing trend for the fourth consecutive quarter and a cost of production of $1,735 per ton. With our consistent focus on cost reduction and aggressive pursuit of debottlenecking projects to further unlock volume, aluminium business is well-placed to potentially deliver 2.5 million tons of production with $1,600 per ton of cost annually. That should result into potential EBITDA of $2.6 billion. Zinc India delivered an all-time high nine-month mine metal production of 780,000 tons, up 2% year-on-year.
Silver recorded the highest ever nine-month production of 556 tons, up 5% year-on-year, and overall cost of production being $1,142 per ton, which delivered an EBITDA from zinc business of $1.2 billion. The business' quarterly production stands at 259,000 tons, with a cost of production of $1,095, recording 15% quarter-on-quarter EBITDA growth and lowest zinc cost of production in last 10 quarters. By consistently investing in ramping up our underground mines and smelters, the zinc business will aim to reach 1.2 million tons per annum with $1,000 per ton of cost annually, with the potential to deliver a business EBITDA of $2.1 billion.
Zinc International faced challenges due to lower zinc rates in this quarter, but has an optimistic future of producing 365,000 tons of volume with $1,400 per ton of cost annually, with a potential to deliver EBITDA of $285 million. The iron ore Karnataka mines' nine-month sales recorded 4.2 million tons, which is 24% growth year-on-year, whereas pig iron recorded highest ever nine-month production of 633,000 tons, up 24% year-on-year, delivering around $130 million EBITDA. Talking about quarterly performance, iron ore Karnataka sellable ore production stands at 1.4 million tons, whereas the pig iron production stands at 233,000 tons, delivering EBITDA of $77 million.
With vigorous efforts on quick payback projects, iron ore business has the potential to deliver $400 million of EBITDA on an annual basis. Electrosteel delivered highest ever nine-month sellable production of around 1 million tons, up 16% year-on-year, and nine-month EBITDA margin standing at $28 per ton. The business consumed highest ever captive iron ore from its fully ramped up iron ore mines acquired last year. Quarterly sellable production stands at 331,000 tons, up 11% year-on-year, with an EBITDA margin of $38 per ton. The business has a promising future of potentially producing 2.4 million tons per annum, with a cost of production of $546 per ton, delivering an EBITDA of $301 million annually. Our power plant cannot be forgotten when it comes to business delivery.
Power sector has delivered $9 million EBITDA of around $90 million, and has a huge potential to deliver $206 million annually with the new power plants in line. FACOR reported 53,000 tons as nine-month production, 10% up year-on-year, with an EBITDA margin of $140 per ton. Quarterly ferrochrome production is 22,000 tons, up 15% year-on-year, with EBITDA margin of $146 per ton. With an already approved CapEx of INR 2,650 crore, the business has output to produce 200,000 tons annually to deliver $100 million EBITDA. Copper business nine-month production stands at 110,000 tons. Quarterly performance shows 33,000 ton production.
With its new age technology and fast expansion, the business can aim to deliver $108 million EBITDA annually. In a significant development, our oil and gas business submitted the country's first field development plan for the Jaya field, awarded under the OALP program and regime. The business' nine-month production is 131,000 barrels, with an offtake of $13.4 per barrel. With debottlenecking initiatives in place, the business has a potential to deliver $750 million EBITDA annually. From the above, we can conclude that all our businesses together have a potential to deliver $7 billion EBITDA annually, if the top-line numbers are achieved after completing the debottlenecking projects.
With our outstanding portfolio of low cost, high return assets, multi-commodity presence, strong balance sheet, and commitment to safe operations, we are well positioned to capitalize on India's growth and deliver value to our shareholders. On capital expenditure plan, we are committed to strategical, strategic capital expenditure plan of $8.4 billion, including expenditure for inorganic growth in the medium term, with an average pay back of 3 years. With this, our revenue will go up by $4 billion, and EBITDA will go up by another $1 billion. These already approved projects are designed to unlock significant value for our key business segments. In aluminum business segment, a significant portion of our capital investment is directed towards upgrading production facilities, structurally reducing cost of production to such quartile and expanding capacity.
BALCO expansion to 1 million tons per annum will take the total capacity to 3 million tons per annum and place us in the top three producers globally. Operationalization of captive coal and bauxite mines and Lanjigarh alumina refinery expansion to 6 million tons per annum will make the business 100% integrated. Zinc India, after successful commissioning of Fumer and mill reopening, is geared to commission 160,000 tons of roaster plant at Debari, and 500,000 tons per annum of fertilizer plant at Chanderia. Zinc International is well on its way to deliver the projects and Gamsberg's expansion, along with its concentrator project, and then further launching investment test. Iron ore business.
Iron ore Karnataka raw production is expected to grow from 7.2 million tons to 10 million tons, and the Liberia will grow from 1.5 million tons to 5 million tons per annum, with a strong focus on upgrading capitalization of Goa pellets. SLN pellets, they will grow from 1.5 million tons per annum to 3 million tons per annum, and 150,000 tons to 450,000 tons in case of pellets. As we will be heading soon into our next financial year, we are very focused on achieving significant milestones with various debottlenecking projects going on across all our units. By strategically addressing and eliminating constraints, these initiatives will significantly enhance production capacity, reduce downtime, and elevate overall performance in terms of increased revenue streams and improved margins.
In conclusion, this quarter's success is a result of focused operational performance, strategic investments, and our commitment to innovation and sustainability, which has resulted in continuous compression of costs and expansion of volume. This effort will continue in the coming days and take our company to a level where it has the potential to deliver $6 billion-$7 billion of EBITDA from its operations annually. We remain optimistic and committed towards this goal. Thank you, and over to you, Ajay.
Thank you, Arun, and good evening, everyone. I'm pleased to provide an overview of our financials during the third quarter of fiscal 2024. Commodity prices exhibited a mixed performance, responding to a blend of global market dynamics, geopolitical developments, and sector-specific demand patterns. India stands out globally, both for growth and stability, marked by substantial investment in both physical and digital infrastructure. The emphasis on manufacturing and significant CapEx, both by private and public, has played a pivotal role in India's growth narrative over the past few years. Capitalizing on strong domestic demand, our teams have showed commendable operating performance through significant cost optimization and cash generation across businesses, ultimately reflecting in our superlative financial performance during the quarter.
Now, let us delve into financial highlights for the current quarter, and any reference to quarter-on-quarter improvement today are after adjusting for one-time Cairn of the Cairn Arbitration that we recorded in the previous quarter, that is second quarter. In Q3, we delivered highest ever third quarter revenue of INR 34,968 crore, which is up 4% quarter-on-quarter. In Q3, we achieved EBITDA of INR 8,677 crore, so showing an impressive 21% growth quarter-on-quarter. We realized a substantial 112% quarter-on-quarter surge in PAT before exceptional items, reaching to INR 2,868 crore in third quarter. And I repeat, the PAT growth before exceptional in the current quarter over the previous quarter is 112%.
This quarter, we also improved EBITDA margin to 29%, reflecting a significant enhancement of 438 basis point margin, mostly coming from our programs around cost compression across businesses, specifically in zinc and aluminum. Finally, we also registered an ROCE, return on capital employed, at 23%, showcasing a commendable improvement of 140 basis points quarter-on-quarter. Moving on to EBITDA bridge. EBITDA experienced, as I mentioned, a noteworthy 21% sequential increase, primarily attributed to higher volume and successful cost reduction endeavors. Additionally, favorable movement in the aluminum and exchange rates also contributed to EBITDA growth quarter-on-quarter. Now, turning to balance sheet and debt. Net debt as of December 31st stands at INR 62,493 crore, as against INR 57,770 crore on September.
The increase is primarily attributed to strategic allocation of funds for CapEx, partially offset by robust cash flows from operations and working capital relief. With INR 11 per share dividend, amounting to INR 4,089 crore in third quarter, Vedanta has been consistent in delivering attractive returns to shareholders. Our dividend yield on average is 10 times than of Nifty 50 companies over the last 5 years. We finished the quarter with healthy cash and cash equivalents of INR 12,734 crore. Additionally, we have consistently upheld average maturity of 2 years of our borrowings, with an average borrowing cost of 9.4%. On liability management, I'm very happy to inform you that our liability management exercise at holding co, Vedanta Resources, has been successful, resulting in a structural improvement in overall capital structure as a group.
As a result, our liquidity position has greatly strengthened. We are now in even more comfortable position to manage our existing debt and take long-term monetary decisions. A quick word on demerger. The stock exchange has given their NOC for the demerger scheme to SEBI. Currently, we are awaiting SEBI's NOC. Concurrently, we are in talks with creditors for debt allocations. Once SEBI's NOC is secured, the scheme will be submitted to NCLT for an order to conduct members' and creditors' meeting. Finally, to conclude, given our expertise in driving improvement across businesses, we are confident in our ability to conclude the year with a strong performance and also realize our potential of near future as covered by Arun. Additionally, we are steadily progressing towards achieving our long-term objectives of vertical integration, operational excellence, and deleveraging. Vedanta remains a growth-focused company, and there are additional avenues around the electronics business.
Further, with our ongoing value unlocking initiative, that is demerger, we will have portfolio of 17 pure-play companies that enable to create substantial value, not only in the present, but also in coming years. With this, I now hand over the mic to Mr. Akarsh Hebbar.
Good evening, everyone. This is Akarsh Hebbar here. I just want to talk to you about the businesses of semiconductor and display. In 2017, we acquired AvanStrate, a company, a Japanese company with factories in Taiwan and Korea. We make LCD glass substrates. It's a technology manufacturing plant, which has technology patents of over 700 patents. This technology only acquired with 4 companies, 3 are Japanese and 1 is American, and the market is about $10 billion. Our vision for this, you know, when we look at high tech manufacturing as a unit, we have experience in both optical fiber and this glass manufacturing, was to bring this kind of manufacturing to replace electronic component imports in India.
As we stand today, in the last four years, semiconductor chip consumption in India has increased twofold, and glass panel consumption in India has increased to about $7 billion, making this all the electronic components together a $100 billion import bill for our country. This is going to become $400 billion, and the only way to arrest this kind of import bill for our country is to make sure that we have this manufacturing within the country, and the best way to do that is to build a semiconductor fab foundry and a glass panel fab, fabrication unit.
Both of these together will contribute to about 35%-60% of your electronic device, which is your laptop, your notebook, your TV, and your smartphone, thereby adding a manufacturing value add of about 35%-60% being made in-house with the creation of these two companies. Not only that, the ancillary companies that will come around this will create about 80-100 foreign companies coming into India and create an ecosystem that will make India the first country in the world to have this high-tech manufacturing ecosystem.
Having said that, we are looking to build this out and make sure that the cornerstone of this technology is the acquisition that we have made, which is AvanStrate, and that glass that we make is what is used in manufacturing of wafer glass, which is used in the manufacturing process of semiconductor power chips, and also display panel, which is the natural downstream factory of our glass substrate. So we have glass substrate with us, which is a cornerstone of that technology. So this is our vision, and this is what we want to build out in India. The government has laid out a very clear-cut CapEx policy of 50% from the state of the and 20, 20% from the, from, 50% from the center and 20% from the state.
So with that, I'd like to pass on the conversation to John Slaven to talk about the other business. Thank you.
Thank you, Akarsh, and hello, everyone. I'm John Slaven. I'm the CEO of Vedanta's Aluminium business. I joined Vedanta about two months ago, after many decades in the industry, and I'm incredibly proud and excited to be leading the world's leading aluminium company. The lowest cost, the most sustainable, and among the largest globally. At Vedanta Aluminium, our singular focus remains on safe completion of our growth and integration projects on schedule and on budget, to deliver higher volumes with structurally lower costs. Following completion of these projects, we will further reduce the cost of production by at least $200 per ton from current levels and increase product premiums by over 30%. We're targeting an EBITDA margin of $1,000 per ton on 3 million tons of annual production, creating a very strong cashflow engine.
The key initiatives to increase hot metal capacity to over 3 million tons per annum are the completion of the 414,000 tons smelter expansion at BALCO, completion of a 100,000-ton volume pre-project at Jharsuguda, optimizing operational parameters. We're evaluating a further 200,000-ton smelter expansion at Jharsuguda, and we've progressed in further volume pre-projects at both smelter sites. We're also gearing up to become fully self-sufficient for aluminum supply to our expanded smelters. This quarter, we will start production at Lanjigarh's 1.5 million-ton Train 1, with full ramp-up of both trains to be completed by the end of financial year 2025. We're also debottlenecking the plant to deliver capacity of 6 million tons per annum by the end of FY 2026. In addition, we're building a mining business to secure low-cost, self-supply of our key raw materials.
For bauxite, development of the Sijimali mine is progressing well, with initial production expected in Q2 of FY 2025. This will be ramped up to 9-12 million tons per annum. For coal, Jamkhani is already producing at 150% of rated capacities. Commencement of Kurloi, Ghogharpalli, and Radhikapur are on track, and we expect first production within 9-18 months for these mines. In the downstream, we are growing our value-added product, or VAP, through expanding capacity from 1.4-2.6 million tons per annum, which increases the share of VAP from 60%-90%. We're increasing rolled products capacity from 44,000-100,000 tons per annum, and we're increasing sales in the more profitable domestic market from 32%-35%.
I'm also delighted to share that Vedanta Aluminium is now ranked first in the S&P Global Corporate Sustainability Assessment for 2023 in the aluminium industry group. This is a very exciting phase of growth, improved profitability, and enhanced sustainability for the aluminium business, and we look forward to sharing more as we deliver on this agenda over the coming quarters. I'll now hand over to Steve Moore. Steve?
Thank you, John, and good evening to everybody. Steve Moore from Cairn. As you know, Cairn has energized India for 30 years, and we've been successfully exploring for, developing, and then producing from on and offshore fields around India. We have a reputation for technology implementation in all aspects of our work, exemplified by the world's largest polymer EOR project implemented in Rajasthan. Since arriving in Cairn, I have drawn upon my extensive experience to identify and implement improvements, I believe better equipping the company for even greater success going forward. Changes include strengthening technical management, increasing the focus on maximizing recovery potential, while ensuring a flow of new opportunities to underpin our growth targets.
We have moved into new areas, such as the Northeast, as well as new plays that provide for significant value creation. In our mature fields, the main focus is halting and then reversing production declines, including the commercialization of booked contingent resources, largely by introduction of new recovery technologies, but also by drilling of additional infill wells, extending the polymer flood EOR scheme to other additional reservoirs, and also commencing a large surfactant flood at the Mangala field, where the polymer flood has already achieved recoveries of 45%. The first phase of this huge project will be on stream in February, with incremental production expected in Q1 of financial year 2025. Further growth will be achieved by bringing additional fields into production, including earlier existing exploration discoveries, DSF acquisitions, and new discoveries resulting from upcoming exploration campaigns. Rapid appraisal and development of selected exploration discoveries has already commenced.
Production from the OALP Jaya discovery has increased to more than 2,000 barrels a day, and an additional 50% expansion is imminent. Additional rigs are already in Rajasthan to support monetization of exploration successes, such as the Durga field, close to our RDG gas plant. Plans for Shakti and MP viscous oil fields are finalized, and the first development phase of a 600 million barrel Mangala tight oil development will commence in financial year 2025. These projects leverage infrastructure at Cairn's MPT facility, minimizing CapEx and OpEx. Also, multi-TCF basin center gas resources close to our RDG process are being assessed for early development.
A 10-well exploration campaign will be executed in Assam during the coming year, and we will mobilize rigs to our east and west coast assets to implement multi-year programs, combining infill wells with near field developments, such as the Ambe and G4 DSF blocks, as well as undertaking near field and more frontier exploration drilling of map prospects containing multiple billions of unrisked resources. In parallel, we are also developing projects targeting CO2, with a target of achieving Net Zero by the end of this decade. Not only will these projects have significant environmental benefits, but they will also free up and provide to us sources of CO2, which we can use for implementing further EOR projects, further boosting recovery, and at the same time, reducing overall operating costs. With that, I thank you, and I hand over to Chris.
Thank you, Steve. And good day, ladies and gentlemen. My name is Chris Griffith. I'm the CEO of Vedanta Base Metals, a mining engineer with 34 years mining experience. I have, in my past career, over the past 14 years, been a listed company CEO of Kumba Iron Ore, Anglo American Platinum and Goldfields. And in my career, I've grown and expanded operations, built mines, fixed and turned around poor profitability mines, and altogether created significant value in those companies. And I'm extremely excited to have joined Vedanta as the CEO of the base metal business, seeking to grow on these amazing set of commodities, copper and zinc, with really exciting growth opportunities, as well as opportunities to create value.
We've a vision for the business to grow this business to more than 1 million tons of zinc and 1 million tons of copper. Growing the EBITDA from currently, from the copper and zinc business, is around $200 million this year. In the very short term, by 2027, growing the EBITDA to $900 million, and then growing by 2030, the EBITDA in this business to just under $2 billion. And how we do that in the zinc business, currently about 250,000 tons of production. In the very near future, we complete the Gamsberg Phase Two project, getting 500,000 tons of production.
We see a pathway from that 500,000 tons to 1 million tons of production by the next phase at Gamsberg, expanding our production at Swartberg, and then also adding production at Namibia. Profitability increases as well as the volume by increasing the margins, which are currently around $500 a ton, all the way to $800 in the near future, and then to $1,000 a ton. And that's how we get to about $1 billion of EBITDA. Likewise, in India and Fujairah, currently producing about 350,000 tons of custom production. In this coming year, we anticipate bringing Tuticorin back into the business, and we're currently in the early stages of developing a rod mill, a 100-kiloton rod mill in Saudi Arabia.
In addition to that, we, we see a pathway of a number of additional projects, in the Middle East, and then also we in the process of bringing KCM back into the business in Zambia. So we see the production of 1 million tons, with the existing margin in that business of around $500 a ton, increasing to $1,800. And that's all between KCM and, and the copper business, we see, delivering about $1 billion of EBITDA from that part of the business. So very excited about this copper and zinc business and its ability to add significant value to the new listed company. And with that, I'll hand over. I think the next speaker is Vibhav.
... Thanks, Chris. Good evening, ladies and gentlemen, I am Vibhav Agarwal. Having spent more than two decades in power sector, now I'm spearheading power vertical of Vedanta Group as Chief Executive Officer. Vedanta is known to have world-class assets in its portfolio, and power is no exception. We follow industry's best practices, create benchmarks with utmost importance to good governance, and making livelihoods at our core. As you know, India's GDP and power demand are set to double by 2030, by government's estimates, creating a huge opportunity for Vedanta, a thermal power generator, to fuel the Indian economy. While there is a strong focus on RE, that is renewable energy, it is crucial to acknowledge that thermal power generation will continue to remain an integral part of India's energy mix. It is here where Vedanta's core business lies and where it aims to be.
Vedanta's power vertical is going to operationalize two new thermal power plants. One is Athena, which is 70 MW in Chhattisgarh, and the other one is Meenakshi Energy, which is 1,000 MW in Andhra Pradesh, totaling to 2,200, which, together with our existing capacity, will take our overall portfolio to nearly 5 GW. With a mixed bag of long-term power offtake contracts and open capacity for sale of power on short-term and medium-term contracts, Vedanta Power will have a stable cash flow with a heavy margin and a very strong balance sheet. Ultimately, we are committed to deliver value and returns to our investors, shareholders in a sustainable manner, while continuing to fulfill the power security of our nation. Thank you. Over to you, Prerna.
Yeah, thanks, Vibhav. Now back to Neeraj for the Q&A now.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Vikas Singh from PhillipCapital. Please go ahead.
Good evening, sir. My first question pertains to aluminum business. While you are giving a long-term guidance of $1,000 EBITDA per ton, just wanted to understand what kind of aluminum cost of production you are baking into that?
So I'll take that question. In terms of LME, it is a very, very different difficult question to to answer. I think we've all seen significant volatility in that price over the last weeks. What I will say about our structurally low cost position in the first quarter of the cost curve, we are very resilient through different LME LME prices. We're confident that we can continue to generate strong cash through through through the cycle. So that's the the the way we're thinking about the the metal price. It's not something we we want to or can predict.
No, but if you are taking a peek at $1,000 per ton, so definitely there should be some assumption in terms of the cost of production basis, right?
Yeah.
And LME.
So roughly, if you take the number of 2,400 LME and 200 as premium and 1,600 as cost that we aim to go to, you will come to a number of $1,000 per ton.
Understood. Second question regarding rig business. Since what I'm hearing that in the market, that the rig cost has been rising exponentially, and we are deploying, deploying more rigs, basically. So just wanted to understand our OpEx cost guidance, and how does it impact our overall profitability?
So you are talking about the cost of?
The OpEx in the oil and gas business, because the costs are rising pretty fast.
So if it is, you are there, Hitesh?
Yes, I am. See, in, you know, oil and gas, our OpEx is driven by two things. One is polymer, two is, you know, our well interventions, where, you know, wells which are declining, where we intervene in it to arrest decline. So these are the two key factors which are driving costs, and, you know, we have also started injecting polymer in our other fields, you know, in addition to Mangala, Bhagyam, which we started last year. So these are the key contributors. But I think more importantly, what will work for us is adding, you know, fields which are beyond the three key fields, and, so those fields will be initially under natural flow, water flood, so the cost will get optimized. So one is that part.
Second, what we are also doing is, given that the water, the polymer injection is going for long, now we have started, you know, doing the reverse, where we are going down on polymer part. So you will see that going forward, that cost also will start declining, especially with related to polymer. And of course, what we intend to do is start injecting, you know, ASP, which we are planning to do in two or three months' time, our first pad injection of ASP, which we've been talking in the past. So that will give us not only a reduction in polymer with a corresponding increase in ASP, but more importantly, a volume growth.
... So overall, are we not expecting any OpEx increase in that business going forward?
For OpEx on a polymer, you know, club model or, you know-
No, no, OpEx, I'm talking about-
Yeah, it will be, it will be around the-
Risk.
It will be around $12-$13 dollars range. Yeah, it will be around the $12-$13 dollar range.
Okay. And, visible difference in the volumes, we can expect from which quarter? Because we have been talking about volume increase from now quite some time, it's been years.
So maybe a couple of points from my side, and Steve can add, you know, given that he's come in and trying to look at things differently. But I think from oil and gas point of view, one is, you know, we have started bringing our new fields also into production. Jaya is one example. But last two, three years, we've been focusing on OALP, you know, where we have 100% participation interest. So here, any volume there is quite significant in terms of our bottom line contribution. So first field is there. We have planned, you know, four more discoveries in OALP, and we are working to monetize those also. So one part is, you know, trying to bring this new field, which brings us a visible addition.
Second, of course, you know, the ASP as well as, you know, infill wells, help us to manage decline and ensure that, you know, our core field, India, give us a stable value. So, Steve, you want to add anything on this?
Not really, Hitesh. I think you covered all the points. I mean, I would agree that we don't just, shouldn't just focus on production, because it's from where the production is coming. We're really focusing on growing our gas production, and we're making a bigger margin on gas. And as Hitesh says, the production from fields like Jaya, it may not set the world on fire, 2,000 barrels a day, but the money associated with that, because it's a very simple operation, is much higher per barrel than the declines we're seeing in Mangala. And we've got many, many. We've hired in some people who are bringing extremely good people, good technologies from around the world. We're just figuring out exactly how to implement them in our fields.
And as Hitesh says, we're really targeting bringing on not just optimizing the existing fields, but bringing the new fields into production. As I mentioned in my small, short talk, you know, we're actively studying the fields that have been found 8-10 years ago, and we see very good opportunities to bring them in economically in the next 6-12 months.
Sure. Thank you for answering my question, and all the best. Thank you.
Thank you. Next question is from the line of Ashish Kejriwal from Nomura Wealth. Please go ahead.
Yeah, hi, good evening. Thanks for the opportunity. Just a couple of questions. One, amid this restructuring of parent's debt, how serious we are in terms of our monetization of steel and iron ore assets? And is it possible to guide where we are in that direction? That's my first question.
Sure, Ashish, thank you. First of all, thanks for the recent report on Vedanta, and your recommendation, and also in terms of target price. I'll start first by saying, if you look at last couple of years, at the whole group, Vedanta Resources, debt has gone down from $9.5 billion down to sub-$6 billion. So $3.5 billion deleveraging at Vedanta Resources. Of course, overall debt for the group remains same, but right now, in terms of assets and liabilities being at the same place, in that case, our balance sheet and the entire structure for the capital is far more harmonious. Secondly, coming to the point of the, specifically, yes, the whole debt risk resources, one plan, but what are the nicer path rate?
With that $3.1 billion worth of bond, and in fact, it ... Our overall strategy for deleveraging as a change, and our, our-
Sorry, Hitesh, but we are losing your audio a little bit.
Excuse me. Okay. And, so, so our, our publicly announced intent of non-core assets disposition remains intact. Right now, we have witnessed interest both from domestic and international players. The process in terms of due diligence, data rooms, Q&As, site visits, is ongoing. We are hopeful to get some offers by this quarter end, and sometime early next quarter, we see the deal going through. So net-net, our interest in disposition of non-core assets remains intact. Deleveraging both for VDL and we as a group remains absolutely our single biggest priority.
Great, thanks. And the second thing is, besides this monetization, we have seen promoters increasing stake from 50.1% to 69%, and then coming back to 63.7%. So, is there further stake reduction from the promoter on the radar? Or is that a possibility which one can look at?
I mean, Vedanta is a large corporation in terms of initiatives, corporate actions. We are never shy. So you're right, 50 going to almost 70, and 5% dilution in the recent past is strategic initiatives. I also appreciate, it's hard to comment any plans in the near future, but is it an option? Looking at our cash position and the priority of deleveraging, those things always can be discussed. But is that in the offing in the near future? Maybe I would say no.
Sure. So next thing is on operations. We are having power sector or power subsidiary separately, where we have Athena and Meenakshi. So, is it possible to share the CapEx plan for that, when that's going to be commissioned? And similarly for coal block also, because now we have been seeing continuous delays in coal block.
... coal block startup or the other mines. So, you know, where we are in that status of that coal block, especially Kurloi and Radhikapur, means whether we have received forest clearance, environmental clearance or land acquisition, where we are so that we can be comfortable that, you know, we can start the mine from second quarter of FY 2025. Sure. So, on the first part, I'll request Vibhav Agarwal, our Power CEO, to comment on the plans for CapEx for Athena and Meenakshi.
Yeah. So, Ashish, when we are actually building up these capacities to start generating, obviously we require a bit of CapEx because these plants are half built. So we, we have- I've already discussed about, you know, making them operational by, FY 2026 completely. So this entire capacity would be up and running by then. We estimate close to INR 6,000 crore would go into these plants to make them completely operational.
Sure. So on the coal block, if you look at Kurloi, it is in the stage one clearance level, and once the stage one clearance is done, it will go to then forest clearance of phase two. Total 963 hectares of land is involved, out of which forest land is 214 hectares. So absolutely on track and we can surely, mine plan is approved, so it's just in a state of pausing. Radhikapur, it's for stage one is already clear, and stage two is continuing, so there is absolutely no apprehension as far as productions are concerned. If you look at Radhikapur coal blocks, then FY 2025, by second quarter, it will come to a capacity of 6 million tons per annum.
And Kurloi, by that time, will be 8 million tons per annum in FY 2025, and in FY 2026, and Ghogharpalli, by FY 2026, will be 20 million tons per annum. So if you look at the, right, Radhikapur 6, Kurloi 8, and Ghogharpalli, twenty. And if you look at the timeline, it is final operations will come by second quarter of FY 2025. So we are confident about second quarter of FY 2025 because, you know, these blocks. Because if you see one case, stage one is clear, other one, stage one is absolutely on the verge of clearance. Then the stage two, then the operation starts. Sure, sure. And sir, lastly, about international zinc, we have seen Gamsberg, they never produced at optimum level, despite, you know, operation for last 20 years.
So, you know, what is the matter over there? And when we are expanding our capacity from 250 to 500 KT MIC, when that is going to happen? So Gamsberg always had the issue of the concentrator. Last, you know, that time we used to have 60% recovery in the concentrator, which has gone up to now 80% level. So huge improvement has happened on the concentrator side to produce better grade of concentrate as well as more quantity of concentrate. However, the mine is passing through a phase when the suddenly between two different locations of ore body, ore body quantity is very high, and somehow the movement of ore body has not been incommensurate with the production level.
So there is a low for the current quarter, and then another one quarter or quarter, Gamsberg operations will come back online in full steam. Sir, expansion by when? No, expansion will continue, but I think the current level of quarterly performance that has fallen down because of the huge requirement of ore burden removal, and another quarter or two, it will come back to our operational level, what we reported earlier. Yeah, that's what we understood, sir. I was asking about, you know, expanding capacity, when it is going to be commissioned? Oh, expansions are on offer and it's by 2025, December or so, expansions will be complete. Sure, sure. Thank you, and all the best, sir. Thank you.
Thank you. Next question is from the line of Amit Dixit from ICICI Securities. Please go ahead.
Yeah, hi. Good evening, everyone, and thanks for taking my question. My first question is on aluminum division, where that waterfall chart, where we find that the other expensive part, if you look at it, which has gone down materially from $130, conversion and other costs, essentially from $142 per ton to $56 per ton. So just wanted to understand, you know, the key drivers behind it and whether it is sustainable.
Vikesh, would you like to respond? Sorry?
Conversion cost, sorry, I never explained.
No, this waterfall chart, there is conversion and others, which is like $56 per ton in this quarter. Last quarter, it was $142. So I wanted to understand why it has gone down so substantially and whether this is sustainable.
So, Ajay, I think this is for you.
Oh, yeah, yeah. So aluminum.
Okay, so there may be some one-time cost involved last time, so because of that only there is a reduction.
So maybe, Amit, the way to look at the overall aluminum COP is total number. And you may have seen a YOY between the last year's Q3 and the current year, 18% reduction in COP, coming across the large buckets, be it aluminum, power or the conversion cost. And across the verticals, be it aluminum or zinc or in terms of oil and gas, our COP has been our single biggest highlight of the last quarter. So journey will continue. In terms of overall targets, we closed aluminum with almost 1,840, the finished goods, COP, as on Q3. And the numbers in December is even lower than the Q3 average. The journey continues. And towards March end, our target is about $1,700 per ton as C2 equivalent.
Okay. The second question is again on Gamsberg. I mean, sketching Ashish's question a little further. So when I look at Gamsberg last year, your MIC was roughly 208 KT. And this year it is much lower. Our recoveries are at a record high. So, you know, just couldn't reconcile the, the apparent issues over there. If the mining is an issue, then it will always remain an issue. I mean, if there, if there is problem around subsidence, around the slope not being proper, I think that will always remain an issue, whether your recovery is high or low. So first, I wanted to understand when you will reach that 250 KT number per year, because that has been eluding us for quite some time.
So in the Gamsberg, as you, if your apprehension is about mine subsidence or slope failure, those are not the issues. Current issues are related to the strip issue and overburden removal. Because of the bad performance of some of the contracts were engaged earlier, they have not been able to perform to the target that they were given. The overburden removal had been slow, and which is having an impact of availability of right grade of ore at this point of time. Hence the, hence you see, in spite of the higher recovery in the mill, we are not able to generate equal amount of MIC. However, current focus of the management is on engagement of best of the best contractors to get the overburden removed as quickly as possible. That's why I predicted that another couple numbers from, Gamsberg also.
But for nine months, we have a number of 126 KTPA. I mean, assuming if you only do it 50, we would reach 175 or something. For FY 2025, can we go ahead and achieve 250 KTPA? That is the main question I have.
All preparation is towards that only, that in the FY 25, we achieve that 250 KTPA number.
Okay, wonderful. Thank you, and all the best.
Thank you.
Thank you.
Thank you. Next question is from the line of Ritesh Shah from Investec. Please go ahead.
Yeah, hi, sir. Thanks for the opportunity. Couple of questions. So first is, possible to quantify how much is the retained earnings numbers for Vedanta and Hindustan Zinc, December end?
Yeah, sure. First of all, Vedanta, as of December, the RE is about INR 1,000 crore. And for Zinc, it is almost INR 2,000 crore. So we as a group, about INR 3,500 crore, is RE as of December.
That helps. Second question is, congratulations on the asset liability, the liability management exercise. I just wanted to get a gist on how much is the cost of funding. One is for the $1.25 billion facility. And the second is, if you look at on a total basis of, say, $6.4 billion outstanding at VRL, how much will be the cost that one should look at?
On the point of the entire debt restructuring, I mean, as I mentioned, I still wish to again repeat, that the $3.1 billion-odd of bonds maturing over next 1 year has been flattened, and it has been pushed by almost 3 years. In case the VRL debt maturity in the current fiscal, as in the FY 2025, is about $1.8 billion, including interest cost of $800 million. At least, we are in a far better position in terms of managing debt at Vedanta Resources. In terms of the funding for 0.25%, the cost of funding is about 13% overall.
This includes guaranteed, non-guaranteed loans as well, as well as ICL from Gain, everything on a blended basis from 0% to around 13%? Or would that be a fair thing on $6.4 billion?
That's correct, yes. Blended rate around 13%, all inclusive.
Okay, and how much would that be for the $1.25 billion wherein we have done bond-free securitization?
The same ballpark, approximately.
Okay. Does Oaktree have any exposure either at the holdco level or at the opco level? Are there any direct or indirect pledge or encumbrances related to Oaktree?
Yes, sir. As part of the whole debt restructuring, the Oaktree has exposure at the Vedanta Resources, $30 million, which gets repaid once we get the money on sixth of October. We also have, you may have seen, two NCDs we have done in the last year from the Oaktree. That continues.
Sir, how much will be the total outstanding? If I remember it right, it was $750 million. Is the number the same or has it reduced?
It is INR 700 million at Vedanta Limited.
At Vedanta Limited. Okay. And sir, I think in one of the prior questions you did indicate that we would be looking at divestments. In fact, you said that it could be probably next quarter or after that. Given the way in which we have done the debt maturity profile, honestly, there is no need for any divestments. Is it because the CapEx ask is high, and hence we are looking at divestments? How should we look at it from a cash flow standpoint? And if you can give some numbers around CapEx at Vedanta consolidated level, I think that would be, that would be great.
Yeah, sure. So you are right. I just post-debt restructuring at Vedanta Resources. Our overall debt position as a group is far more comfortable. And at the cost of repetition, redemption, now, given there is no looming large maturity at Vedanta Resources, our ability of taking slightly longer term calls at VRL on refinancing has enhanced significantly. Having said that, the ESL or steel disposal has been independent, and that continues. As I mentioned initially, right now, the process in terms of due diligence, data room, Q&A, site visit is ongoing, and we are hopeful to get firm pricing by this quarter end. That continues. In terms of deal culmination, sometime in Q1, so that remains on track. It is fast on the horse.
FY, would that be right?
Q1 of next fiscal year. That's correct.
Next fiscal. Perfect. And, just, just bookkeeping questions, any update on GR to RE at Vedanta? I think we were securing client and approvals, and I think Hindustan Zinc has some, I think court case on fifteenth of February. If you could provide some update over here, that would be useful.
That is, that is the position at Vedanta Limited. Still, the engagement with the lenders are ongoing. It is progressing, but, I, I can't right now give a definitive date when do we close it. On the zinc side, we got now all the approvals, including the shareholders. Now before the NCLT for the second motion, the matter is being heard on the fifteenth of February, and, depending upon how the things progress, we foresee that getting closed by this quarter end.
Sure. On the CapEx side, I just asked that question: How should we look at it, given the cash flow profile is quite comfortable? We have given stiff targets on volumes, but how should we look at the CapEx number?
Currently our CapEx guidance was about $1.7 billion, as per our last guidance, and we see it being maybe a tad lower, about $1.5-$1.6 billion on a higher side. Historically, last multiple years, we have not exceeded our guidance on the CapEx. In fact, we have been a bit lower on that side without impacting overall timeline for the project. In terms of guidance for the next fiscal, I think we have to await for one more quarter. As part of full year number, be it the volume, COP, and the guidance for the CapEx will be provided when we speak next time in three months.
Perfect. And just last question, does the group have, has it engaged in advance pay and supply agreements, to manage the cash flows historically, or do we have anything outstanding at this point in time?
In terms of advances, I think, I think they are routine, retention, and they are part of, working capital. Yes, we do have those advances, which keeps getting, unfunded in terms of repayment, and we keep taking it. That is working capital that each business unit tracks separately.
Sir, would it be possible for you to quantify that number, advance pay and supply agreement, or anywhere on the balance sheet that we can actually figure it out?
It's almost INR 2,000 crore as on December.
Okay. This is very helpful. Thank you so much. I really appreciate it. Thank you.
Thank you. The next question is from Linus Barrett from Standard Chartered Bank. Please go ahead.
Sir, hi, thanks for the call. First question from me is, Vedanta Limited's domestic rating has been downgraded. Sir, hi, is this better?
Little bit.
Yeah, hi. My first question is, Vedanta Limited's domestic rating has been downgraded a couple of times by India Ratings in the last few months. How do you think this will impact the funding costs for Vedanta Limited going forward?
Yes, the India Ratings, in fact, it came up first as a disappointment, and we have disagreed with them as well. But again, sometimes more than one respectable point of view is quite possible. Also, Barrett, I would like all of us to also take a look at ratings by CRISIL, which is a tier one agency, in the same week, last week, where CRISIL has reaffirmed Vedanta rating at double A minus with developing action. And we are engaging with India Ratings. Their, their key rationale for downgrade has been recent high-cost borrowing ending December. And we did point out that it was an aberration, given ongoing debt restructuring at Vedanta Resources. As you see, we are dealing with one large Indian bank for a very large value loan at a single digit cost.
So we'll be engaging with India Ratings, and we are very hopeful that very soon even they will give us an upgrade to double A. So far, it's an impact on the money market. We don't foresee this action will have an impact on our ability of tapping funds in terms of value or cost of funding. As I mentioned, CRISIL has reaffirmed double A minus for us.
Okay, sure. And then the second question is, you mentioned Oaktree's exposure at Vedanta Limited is now at about $700 million. Can you let us know what the interest cost on those facilities is and what kind of security has been pledged?
It's a 12% coupon rate.
And the security?
It's against fixed assets. It's 1.2 exposure.
Okay. That's it from me.
Thank you.
Thank you.
Ladies and gentlemen, we'll take that as the last question. I'll now hand the conference over to Miss Prerna for closing comments.
Thank you, Nirav, and thank you all for taking the time to join us. I hope we were able to respond to most of your questions. In case you have any further questions, please feel free to me or my colleagues at IRT. This concludes today's call. We look forward to reconnecting you for next quarter's earnings call. Thank you, everyone.
Thank you very much. On behalf of Vedanta Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.