Ladies and gentlemen, good day and welcome to Vedanta Limited Quarter 2 Financial Year 24-25 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 the conference call, please signal an operator by pressing Star and Zero on your touch-tone phone. Please note that this conference is being recorded. Participants connected on webcast link may change the quality settings to 1080p to watch the proceedings in best quality. I now hand the conference over to Ms. Prerna Halwasiya, Deputy Head of Investor Relations and Company Secretary, Vedanta Limited. Thank you and over to you.
Thank you, Aditi. Good evening, everyone, and welcome to Vedanta Limited, Quarter 2, FY25 Earnings Conference Call. I'm Prerna. I'm the Deputy Head Investor Relations and Company Secretary for Vedanta. On behalf of the entire team, I would like to thank you for joining us today to discuss our financial results and business performance. The transcript of this call will be made available on Vedanta Limited's website, but press release and presentation are already available on our website. Today, from our leadership team, we have with us Mr. Arun Misra, our Executive Director. Mr. Ajay Goel, our CFO. Mr. Ajay Agarwal, President Finance. We have Charanjit Singh joining us as our Group Head Investor Relations. We have also leaders from some of our key businesses: Mr. Sunil Gupta, CEO Jharsuguda and COO Aluminum Business. Mr. Anup Agarwal, CFO Aluminum Business. Mr. Chris Griffith, CEO Base Metal Business. Mr.
Hitesh Vaid, CFO, Cairn Oil & Gas. Please note today's entire discussion will be covered by the cautionary statement slide on the presentation slide number 2. We will start with the update on our operational and financial performance, followed by the Q&A session. Now, I would like to hand over the call to Mr. Arun Misra.
Good evening, everyone. Thank you for joining today's quarterly business performance update. I'm pleased to address you today to share Vedanta's second quarter and first half of FY25 performance. The first two quarters of FY25 were marked by growth and operational excellence, with a strong commitment to sustainability. As a global industry leader, ESG is at the core of our operation, and as you are aware, we have partnered with Serentica Renewables to secure 1,826 megawatts of renewable energy power delivery agreements. Serentica's ambitious goal of adding 17 to 20 gigawatts of renewable energy capacity by FY2030 aligns with our vision. In the second quarter, Zinc India expanded its renewable energy commitment by an additional 80 megawatts, bringing our total group commitment to 1,900 megawatts. Both Zinc India and our aluminum businesses have already begun utilizing renewable energy.
We are determined to extend this initiative to all our businesses in the coming quarters, steadily moving towards our goal of net-zero carbon emissions. We successfully hosted the third edition of the Delhi Half Marathon, an event dedicated to support the cause of Run for Zero Hunger. I'm thrilled to announce that our collective efforts have made a strong impact. Together, we have raised 10 million meals to support children and animals in need through the Anil Agarwal Foundation. Our commitment to ESG is recognized globally. We are proud to announce that we have once again secured a top-three ranking in S&P Global CSA assessment for the year. This marks our second consecutive year of this achievement, highlighting our strong ESG practices and reporting. Now, coming to Quarter 2 FY25 key highlights, moving on quarterly performance, I'm pleased to report a strong Quarter 2 performance marked by operational excellence.
Our quarterly EBITDA increased by 44% year-on-year to INR 10,364 crores. We have delivered our all-time high first-half EBITDA of INR 20,639 crores, up 46% year-on-year. Our EBITDA margin increased by 9% from a robust 25% in the second quarter of last year to an industry-leading 34% in the second quarter of the current fiscal, driven by our structural cost reduction initiatives and operational efficiency. Our profit after tax before exceptional increased by 230% year-on-year to INR 4,467 crores. Moving on to operational performance, Vedanta's aluminum and zinc operations continued their industry-leading cost positioning, consistently ranking in the top quartile and decile of the global cost curve, respectively. Aluminum business achieved its highest-ever quarterly and half-yearly production of 609 KT, up 3% year-on-year, and 1.205 million tons, up 3% year-on-year, respectively. Our quarterly cost of production is lower by 4% year-on-year.
Despite rising alumina market prices globally, we maintained hot metal costs flat sequentially, demonstrating the strength of our assets, our operational, and buying efficiencies. Hindustan Zinc achieved its highest-ever second quarter mine metal and refined metal production at 256,000 tons and 262,000 tons, respectively. We have delivered lowest first-half costs in the last four years, with second quarter FY25 Zinc India cost of production being $1,071 per ton. Going forward, we are on a clear trajectory to achieve the lowest full-year cost of production in our last four years of operation. In Zinc International business, Gamsberg Mine delivered a strong 21% quarter-on-quarter increase in MIC production, reflecting significant progress in operational stability and efficiency. We anticipate MIC production to normalize by the end of this fiscal year, and we are confident in achieving 230,000 tons of total MIC production for the full year in our Zinc International business.
Our iron ore business faced some external challenges in the first half of this current fiscal. Bicholim Mine in Goa was unable to dispatch ore due to lack of transportation permits in the first quarter. Heavy rainfall further impacted production in the second quarter. However, we have now secured the necessary transportation permits, and Goa mining operations are now running at or above our stated capacity. With these developments, we are confident of achieving our annual production guidance of 11 million tons per annum from the iron ore business in FY25. Regarding growth projects, after delivering a strong performance in the first half of the year, we are optimistic about continued growth and opportunities that lie ahead. In aluminum, ramp-up of Lanjigarh Refinery Train 1 is progressing well.
The current total production run rate is 3 million tons per annum as we speak, as against 3.5 million tons per annum capacity. We expect to fully ramp up Train 1 by December 2024. We are also on track to commission Train 2 in Quarter 3 FY25, with full ramp-up expected by Quarter 1 of FY26. BALCO's melter expansion is advancing steadily, with all equipment orders fulfilled and installations under advanced stage. These developments, along with some volume debottlenecking projects, will enable us to reach a production capacity of 3.1 million tons per annum of aluminum, with 90% comprising value-added products and alloys. In Zinc India, 160,000 tons per annum roaster at Debari and 0.5 million tons fertilizer plant are progressing as planned, with final commissioning targeted in the last quarter of this current fiscal and second quarter of the next fiscal, respectively.
Zinc International is one of the largest zinc deposits globally. Our phase 2 expansion project is in full swing, with full ramp-up expected during FY26. In fact, I am happy to announce that we have received environmental clearance for our underground mine expansion and 300 million tons per annum ferrochrome capacity. With this, we are on track to become India's largest ferrochrome producer. In power, this fiscal year will mark the full commissioning of Meenakshi Power Plant, 1,000 megawatts. Our board has also approved the project CapEx of ₹5,209 crores for 1,200 megawatts Athena Power Plant. As you are aware, we have already secured ₹3,900 crore project financing in this project. With this, we are well positioned to generate five gigawatts of commercial power within the next 18 to 20 months.
Looking ahead, we remain committed to delivering an outstanding performance in FY25, driven by our robust project pipeline and strategic investments. Our integration and growth projects are progressing smoothly, and we anticipate achieving these milestones within the next nine to 12 months. Our focus on cost reduction has been a cornerstone of our profitability. Through our structural interventions and initiatives, we have significantly reduced our cost of production over the past 12 to 15 months, and we are confident in our ability to continue this trend in the coming quarters. Our demerger process is also progressing well, with the first NCLT hearing successfully completed. In summary, we have continued our strong performance, building on the momentum from the first quarter. We are proud to report our highest-ever first-half EBITDA of INR 20,639 crores in this year.
The second half of this year will be a transformative period as our major projects come online and ramp up, going by the historical trends, where the first half typically accounts for 40% of the total annual EBITDA. We anticipate achieving our highest-ever annual EBITDA in FY25 by delivering the remaining 60% in the second half. In Vedanta, we remain committed to our long-term vision of sustainable value creation. By focusing on our strategic priorities and leveraging our unique capabilities, we are well positioned to capitalize on emerging opportunities and deliver sustained growth. Over to you, Ajay.
Thank you, Arun, and good evening, everyone. This quarter stands out as the most remarkable one with considerable advancements in our corporate actions, robust financials, and highly effective operations. I'm very pleased to announce that we have achieved our highest-ever H1 EBITDA of ₹20,640 crores, a 46% growth YOY, and second quarter EBITDA of ₹10,364 crores, with a 44% YOY growth. This is driven by structural and sustainable cost optimization and supported by favorable prices. YOY compliance focuses on core performance and excludes the one-time gains from key arbitration that we recorded Q2 of last year. In this quarter, our PAT before exceptional items is ₹4,467 crores, reflecting 230% growth YOY. So I repeat, it is a 230% growth YOY. And with the addition of exceptional items, our reported PAT reached ₹5,603 crores. Let us now turn to a few of the financial highlights for the second quarter.
Revenue for the second quarter at INR 37,171 crores, 10% growth YOY. EBITDA INR 10,364 crores, marking a 44% growth YOY. EBITDA margin at 34%, an increase of 900 basis points YOY, which is an industry benchmark. Our net debt-to-EBITDA ratio further improved to 1.49x, the best in the last six quarters for Vedanta. Also, our ROC stands at 23%, up 152 basis points YOY. And finally, the free cash flow free capex at INR 8,525 crores, reflecting a 50% growth YOY. Moving on briefly to balance sheet and debt, I'm happy to report that our net debt as of September end has declined to INR 56,927 crores, marking a reduction of INR 4,400 crores versus Q1. So this is sequential. We finished the quarter with a liquidity position of INR 21,539 crores, reflecting an increase of 30% both YOY and quarter-on-quarter, with an average maturity at three years.
On corporate actions in July, as you have noted, we raised about ₹18,500 crores via QIP, which is the largest issuance in metals and mining in our country. The funds from the QIP will be leveraged by Vedanta Limited, thereby reducing interest costs by over ₹1,000 crores annually. In August, we further augmented our capital base by raising ₹400 million through offer for sale for Hindustan Zinc Limited. And finally, all this has been well noted by rating companies, and ICRA has raised our long-term rating from AA minus to AA, and CRISIL revised its outlook to watch with positive implications while reaffirming our AA minus rating. On VRL, I'd like to highlight the significant progress in deleveraging our parent company, Vedanta Resources Limited, VRL.
Over the past two and a half years, we have reduced debt by INR 4.7 billion, bringing it down to INR 4.8 billion, which is the lowest level in a decade. I repeat, the VRL debt at INR 4.8 billion is the lowest over a decade. In each one of the current years, which is April-September, VRL debt has come down by INR 1 billion. So we are ahead on our commitment of INR 3 billion over three years. So we are doing more, and we are doing earlier. Additionally, in the current quarter, we refinanced at Vedanta Resources INR 1.2 billion bonds. Of this, the last tranche came at 9.99% yield. Overall, this refinancing is 3% lower cost, resulting in annual savings of over INR 300 crores.
With VRL's ongoing deleveraging and other actions such as refinancing, the parent company will have a single-digit cost in the near future, with interest obligations at VRL being covered through borrowings, while the principal will be financed through a routine dividend. This will ensure that VRL in the future is self-funded. On demerger, the demerger, as you may have noticed in its final stages, with shareholders and the creditors meeting planned in coming months, is set to unlock significant value and enhance our leadership in critical minerals. In summary, our EBITDA for the first half at group level stands at about INR 2.6 billion. Historically, our second half has accounted for about 60% of our annual performance. So we expect a similar trend in the current year. Besides the linearity between H1 and H2, there are other key businesses such as Zinc International, Iron Ore, and Steel.
They will see an improved momentum in the coming months. As you have noted, several major capital projects are set to reach completion across key business segments, and our growth momentum will further carry forward into next fiscal. We will have a monthly EBITDA run rate of more than INR 650 million as we close FY25 the current year. Given these developments, one may expect an even stronger EBITDA in FY26 next year. We will share further guidance on our FY26 outlook later in the year. In conclusion, I'd like to reaffirm our commitment to three key areas, which are business delivery, deleveraging, and demerger. Thank you. And with this, I hand over to operators for Q&A.
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 the touch-tone 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. We'll take a first question from the line of Amit Dixit from ICICI. Please go ahead.
Yes, hi. Good evening, everyone. And thanks for the opportunity. Congratulations for a good set of numbers in a very trying quarter, I would say. A couple of questions from my side. The first one is essentially on aluminum cost. So if I look in this quarter, the hot metal cost is $1,734 per ton. Our guidance for the year is lower, but alumina costs have surged. So what confidence we have in meeting the alumina cost guidance, sorry, aluminum cost guidance in this backdrop?
Hello. Our aluminum CFO, Anup Agarwal, to respond.
So thank you, Ajay. So I'll be to your question now. So you have seen even in this quarter, though, while the alumina cost has been higher, you will see that on the power and the other cost, we have shown a lower number. Going forward, the near-term opportunity lies in Lanjigarh expansion. The work that we have done on our assets that will give us further reduction in terms of the power cost and the operational efficiency. So Amit, what we've done is we kept the target the same, $1725, $1625-$1725. It has gone within $1725, and we believe that in quarter three and quarter four, we will be back to the lower cost level, which will maintain our cost guidance at the same level.
No, the question was more in the line because alumina prices have surged in the recent times. So maybe the inventory that you might have had for imported alumina could have kept the cost a little bit lower in Q2. But going ahead in Q3, when that complete impact will hit us, and coal mines are still some way away. So that's what I was wondering, that how can you maintain the alumina cost at the similar level as Q2?
So let me reiterate. You're right. See, the alumina prices have increased bought-out alumina. Let me reiterate that as we go into Q3 and Q4, Lanjigarh's ramp-up is coming into the view. Arun, we mentioned that our present run rate is somewhere around three million tons, almost 30%-35% higher than what we have done in the first two quarters. So the cost opportunity lies in Lanjigarh's ramp-up. As I mentioned, on the power side, though, first two quarters, we've done major repairs and maintenance. We will now have the benefit of it where you will see almost $40-$50 lower. So Amit, basically, we will see a bought-out alumina prices. It will be higher, which will be to an extent or mostly offset by power cost and the other cost.
And of course, on the alumina, let me also tell you that not all our contracts, bought-out contracts are market linked or the API current cost linked. There are also some contracts which are linked to the alumina, and that will give us the benefit.
Understood. Thank you. The second question is on oil and gas. So is it possible to give some more detail about the progress of ASP injection in Mangala Valley pads? We have taken some write-back of impairment that we took earlier. So how much more impairment can we write back based on the current progress? In particular, ASP injection progress would be something that I'm looking for. And also, whether we expect this decline in Mangala Oil Field and MBA Oil Field rather to be arrested in this year.
Sure. So let me start with the first, the key impairment part. I'll request my colleague Hitesh Vaid, oil and gas. He could comment on the volume one. So as you know, Amit, in terms of impairment exercise across the business verticals between the carrying value and the valuation and future cash flows, this exercise is quite routine. It is semi-annual. We do it at least twice a year. So it is part of the same process, September and the March end. Now, for enhanced oil recovery, Cairn Oil & Gas has commenced injection of ASP in a few select fields in Mangala Field. Now, the program of injection of ASP is working out well. It will also proliferate in these two other areas. This has led to accounting for higher resources in the entire valuation model. That is one part.
Secondly, as we know, by looking at the valuation of an asset, there are a dozen other factors. Examples remain the cost of capital, tax rate, discount rate, gas prices, all of those. Looking at all the factors, we have taken an impairment reversal in the current quarter. Now, while making a provision, one has to be conservative. And when we write back the provision, we are doubly conservative. The entire write-back has a tinge of conservatism on the impact. And in terms of the volume, I'll request Hitesh Vaid to comment.
Hi, Amit. So ASP has been one of our key projects which we have been trying to implement. What we have done is we have started injecting in a couple of well pads in Mangala. In parallel, we have also awarded a contract for large-scale execution across a cluster of Mangala well pads. So while the current injection has already started and we'll start seeing some gains in the next three-to-six months, the larger project we take is also on where we will start injecting in around 15-18 months' time across all the well pads. So ASP is one project which we were talking about. Now it is being executed on the ground.
Of course, as we have said earlier, the ASP project is going to lead to an increased recovery of around 10%, which will translate across MBA fields to an increased recovery of more than $200-$250 million. That project now is on the ground running, and we will start seeing some reversal of the decline which we have seen in the past. This is one part of the story as far as oil and gas business is concerned. Beyond the ASP, as well as the infill wells which we are drilling to manage decline, what we are also doing is on the east coast, we are working on a five-year exploration campaign, and that will be intended to start somewhere in March. On the west coast, we are again starting a drilling campaign from December 2024 onwards.
The rig is being mobilized, and that program targets five infill wells. In addition, we have a DSF field in the west coast, Cambay, which we had acquired some time back. So we are trying to put that also into production, which will happen once we complete this five-year program. Then we have continued drilling program to get that also in line. In parallel, what we are also trying to do, I mean, one of the most exciting prospects which we have is our deep water east coast prospect. We are looking for partners. It has material volume. We believe it is in excess of 5 TCF, and that's why our plan is to start the well in a year's time. We have three or four discoveries in that block.
So we are trying to monetize that discovery as well as bringing new partners who can help us with further exploration. So that's the whole story. But yes, the ASP injection, which is the key, we have already started, and we will start seeing gains from the project. Great. Thank you so much for the elaborate explanation. Thanks, and all the best.
Thank you, Amit.
Thank you. We'll take a next question from the line of Ashish Kejriwal from Nuvama Institutional Equities. Please go ahead.
Yeah, hi. Good evening, everyone. And thanks for the opportunity, and many congratulations for the great set of numbers in this time. Sir, again, my question is also on aluminum. You said that we can overpower the rising alumina price by reducing power cost or increasing our aluminum volume. But even after that, one thing is how our power cost will reduce $40-$50 when either you are saying that FSA power will increase or oxygen prices are on a higher side. And secondly, in terms of alumina, when you are talking that we have delivered around $1,813 per ton cost in this quarter, so do you think that we can manage going forward also with the help of captive alumina as well as you mentioned that we have a contract also in alumina?
So this matches, if you can explain in detail, which can give us a comfort or confidence on maintaining our guidance of overall 1725, that will be great, sir.
Hello. Hi, Ashish. I'm on this side. So Ashish, first, let me come to the power cost. As I said in the first two quarters, we have done major repair and maintenance in our assets, and when we look at it, there will be a cost to the $40-$50, which is gone in this quarter. And to your question on the coal, both the linkages and our captive coal now constitutes around 85% of our total coal consumption. And in MCL, e-auction premiums are minimal. So you will see that is what gives us the confidence that once the monsoon is over, we will get the better coal grade, and the coal cost should be $50-$60 lower.
So that's one point. The second point on your question on the alumina, so I agree that maybe a month or two, we may see a higher alumina cost. But as I said, that as we go forward in the quarter three and quarter four, the Lanjigarh expansion, I will reiterate that we are running at a capacity of 3 million tons, that's a run rate of 3 million tons. And we will also start commissioning the train two in the month of December. So as we exit the year, we will almost be at a run rate of, you can say, 4 million tons with our own alumina. And of course, some long-term contracts at a lower price, as I said, we believe that quarter four cost should offset if at all some cost inflation is there in the quarter three.
That is what gives us the confidence that we should be able to meet the 1,725-1,750 value for this year.
Great. So you mean to say that we are already so October month also, we have run at a run rate of 3 million tons in alumina plant? Or this is as of today, you are saying?
Yeah. So Ashish, let me tell you, and I'll reiterate what we said in the last call also, that we've been running with some shared infrastructure. Okay. Those shared infrastructure were in terms of red mud handling system, alumina handling system, and the bauxite handling system. So in the month of October, one of those have come online, that's the red mud. We will have the alumina handling system coming online this month, the first half. And that is where the capacity has gone up to 3 million tons. So current capacity, as we are running today, is at 3 million tons.
Sure. Sure. That's helpful. Secondly, on coal blocks, because we have been hearing it for the last one year now that we are on the verge of commissioning of this coal block. So, is it able to understand that when can we expect now and where we are actually on receiving the approvals?
Yeah, so our Aluminum Sector COO, Sunil Gupta, is on the line. I'll request Sunil to comment on this question.
So for the coal block, like the Kurloi coal block is advanced stage now. We are on the verge of getting the risk managed. We have already done the public hearing and everything is done. We have started acquiring the land also. Government land is already allotted. PL land is already allotted. So Kurloi coal block, we are expecting first quarter of 2026, it will get operational, and which we are trying to ramp up by third quarter of 2026. So Radhikapur, we have already got the forest clearance. We are in the process of land procurement there. And which is also expected that we are trying to operationalize it for first quarter of 2026. And for the Ghogharpalli, we have already got the vesting order from the government.
We have started the approval process from the government, which we are targeting by fourth quarter of 2026. It gets operationalized. Okay. So, sir, in terms of.
We are on the ground, right?
Radhikapur or Kurloi, do you think that any further delay in that, any other thing which can stuck us, and this Q1 can become 4Q FY26?
Right now, with Kurloi mines, I am very, very clear that it will get started in the third quarter of 2026. Radhikapur also, we are on track, and only because of some central election, it will delay some process. Otherwise, again, it has picked up, so I don't see any further delay in the opening of the coal blocks.
Understood, sir. And sir, lastly, about our demerger, where we stand, do we think that we can still manage to complete the process by FY25, and/or there could be some spillover? Or is there a possibility that we get approval for another company and not for all, and then we can't demerge at all?
Are you here to answer?
Yeah. So thank you for your question. We are very confident that this whole demerger process is the last leg of completion, and we are very confident that this will get done on or before 31st of March 2025. Our scheme is extremely flexible, and it allows us, as and when each of these companies gets approval from NCLT, along with creditors and shareholders' approval, has the ability to get listed as and when we have the approval.
Okay. Okay. Thank you, and all the best, sir.
Thanks, Ashish.
Thank you. We'll take a next question from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Yeah. Good evening, everyone. Thanks for this chance. My first question is on aluminum. So during the quarter, we had an accident at Red Mud Pond at Lanjigarh. Just want to understand what was the impact? Is everything on, I mean, running regularly now, and what was the financial impact also of some compensation which we read in the news articles?
So I'll show you with that. So for the Lanjigarh water pond breach, there is no impact on the operation. When it happened, we did not have any interruption in the operation. We are running our Lanjigarh plant as usual. There was only some part of the land which got affected, which has been already cultivated, and it has been given back to the villagers. We had already delivered some compensation, as well advised by the district administration. As such, there is no financial impact because of this pond breach. Now, we have already taken steps to, again, repair of this pond, water pond. And I think IIT Roorkee has been engaged in that, and we have already engaged one third party for the review of the design.
Sunil, I would like to add here. The first clarification is it is not the Red Mud Pond. It is an in-process water reservoir. Again, these reservoirs are normally empty through the year. It gets filled up only in the monsoon. And this time, there was an unexpected rainfall over a short period of time that caused the overflow and caused the water to go out. That is why our people were so alert. It could be quickly checked in time. Whatever little damage to the paddy fields happened, that could be recovered. And now, we are ensuring that what is the excess amount of rainfall, what it can accommodate. To that account, we are putting global experts into the redesigning of this process water pond.
Normally, we don't need to increase the capacity, but we will ensure that last 50 years, highest ever rainfall, we should be able to protect ourselves, and that is the kind of global standard we are trying to adopt now.
Understood. That's great to hear. Next question is on alumina production. So we have guidance. There has been cut versus what we had guided at the start of the year. So just want to understand, is it because of delaying train two or some other reason?
Hi, Sunil. See, as I said in the beginning, that we were running with some shared infrastructure. You're right. So we had some delays there and not helped by the unprecedented rain that we saw. But I think that is now behind us. And quarter two, we will see almost 30%-35% better production compared to the H1. But yet, in the beginning of the year, the guidance that we had given, we are now revising our guidance slightly lower.
Understood. And given that, sir, you commented that end of fourth quarter, we will be running at four-odd million-ton run rate. So for next year, should we expect, I mean, somewhere in the range of four to five million tons of production? And do we, I mean, what's our bauxite sourcing break-up for that?
Sunil, let me tell you, as I said, that we will start commissioning the train two by end December, early January. We expect that by June, July, we should be able to fully ramp it up. Okay. To that extent, the math, if you will do, you will get where we will have the alumina. Coming to the bauxite side, we said in the beginning that Sijimali, we are seeing a good traction now. We expect that in quarter one, next year, we should start the mines. To the bauxite side requirement, we feel that OMC, and OMC is also expanding its mine, between OMC, Sijimali, and maybe some other sources, we should be able to tie up the entire bauxite side requirement for the next year.
Understood. I just wanted some more, I mean, some details on these coal mines. So Radhikapur, FC2 was pending as far as I remember. So have we secured FC2 for Radhikapur? And also, what is the status of Ghogharpalli? Is the mining plan or EC & FC being secured there?
Sunil, you have to answer that one.
I mean, to Radhikapur, FC2 still is in process. We are targeting that within one month time we get it. Ghogharpalli, like I said, we have already received the mining plan and land schedule. Now, we have submitted for the approval to the government authorities.
Okay. And for Sijimali, I think mining plan is approved, but what is the status of EC & FC and Sijimali?
For the Sijimali, already, we have done the public hearing and the bond. We have applied for the FC1. We are expecting that FC1 is regained by this month or by 13th of December. Sijimali is already on track. We have already acquired 800 acres of buffer land. This is the status of Sijimali.
Understood. If I may just squeeze in one more question on VRL. One is, we had the ICL due, I think, by end of this year, December. So are we on track to receive that outstanding intercompany loan from VRL, number one? And number two, at $4.8 billion net debt, what is our interest obligation? And also, are we looking at ending this year lower, or has there been some front-ending of payment, I think, from a perspective in the court? So for this year, is it possible to guide what is the end target for net debt at VRL?
Sure. Maybe I'll start with the last first, Sunil. And as you recollect, at the year beginning, we guided the market. The VRL debt, we further deleveraged $3 billion over three years, starting this year, 1st April. And in the first half alone, we have deleveraged by $1 billion. Now, how much more we can do? As you know, in the second half, the requirement is almost $220-odd million between now and December, and plus interest, almost equal value. We believe most of the second-half requirement will be met through three operating cash flows. So one may look at a number of more about $4.6 or so at VRL once the year is closed. Secondly, in terms of ICL between VEDL and the Vedanta Resources, the last tranche, almost $4.1 million is due towards year-end. It will get serviced as we come close near the maturity.
The past couple of installments have also been serviced, so we'll address as it becomes due in third quarter. Finally, in terms of interest cost, the second-half requirement is almost $190 million. And we believe our next year requirement will be almost $550 million-$600 million. I'd also like to present the bigger picture for Vedanta Resources, very briefly. So the $4.8 billion requirement as of now has three components. It has bonds worth $3 billion. It has $1 billion worth of bank loans. And the remainder, $850 million, is PXF, the private facility from Standard Chartered. We will refinance all the bond stacks between November and January over next three months' time. The bank loans will get refinanced, repaid as and when they become due. And finally, the PXF from Standard Chartered. Next installment is due sometime in April. It will be addressed. Half, $400 million, by the bond issue in April.
So net-net, overall, by the end of this fiscal or early Q1 next year, the cost of funding at Vedanta Resources will be single-digit debt, give and take $4.5 billion. In that case, the interest obligations at VRL will be met through a routine brand fee. Hence, the operating profit and loss account at VRL will be self-funded. With bond refinancing done in the last couple of months and more in the offing, the maturities at VRL going forward will be $700 million or so. And that principal payment can be easily taken care of by a routine dividend with 5%-6% yield. Net-net, VRL starting next year will be self-funded in equal gain, both payment and the balance sheet.
Yeah, that's a great turnaround. So thanks for this detailed explanation and congratulations on this. I'm done with my questions. All the best to the team.
Thank you, Sumangal.
Thank you. We'll take a next question from the line of Ritesh Shah from Investec. Please go ahead.
Hi, thanks for the opportunity. A couple of questions. First, I'll just continue with VRL. So just a clarification. When we say this $4.8 billion, is this including ICD and whatever we have outstanding on KCM? If not, including both these variables, what the number would be?
The 4.8, Ritesh, is actual debt. It does not include the intercompany loan. When we speak of numbers of 4.7 deleveraging, it is all asset level. 4.8 plus 0.4, 5.2 is total debt.
Do we, sir, have anything outstanding at the Konkola Copper Mines? I think there were some operational challenges which were taken care of, and there was some initial incremental commitment of $1.2 billion over a few years. Is that a part of debt or something that we are looking at at VRL level?
Yes. So the 4.8 includes everything, Ritesh. So it includes everything.
Also, again, we have got Chris, who is our CEO of Base Metal. He can give you a better update on the operational status of Konkola Copper Mines and the way forward, Chris.
Thanks, Sunil. Just for the fundraising for $1 billion over the next five years, that's still work in progress. So that doesn't add any debt to VRL. At some point in time, as we raise that to complete the investment, that will then be debt at the KCM level, depending on where the investment comes from. But perhaps I can just mention that, as you well know, we got the asset back in August. From September, where we started heating up the plant, we did just over 1 kilotons of copper in September. October, we were already at 8 kilotons. This month, we should be at 9. We should be at a run rate of about 15 kilotons per month by the end of the financial year.
This year, we should already, in the eight months of production, produce around 80-90 kilotons of copper and be at an annual run rate of 150 kilotons already by the end of eight months of production. That's kind of the level of production that we were producing before the liquidation five years ago. A very rapid ramp-up on the back of us taking over the production. As many of you know, this truly is one of the spectacular copper ore bodies globally. As we finish the investment over the next five years of $1 billion, that's on top of what has already been invested in KCM of $3 billion. Low capital intensity investment, quick ramp-up in a high-grade, long-life ore body.
So as we speak to potential investors in KCM at the moment, so we've seen lots of interest in this ore body. There's, of course, a lot of interest in copper. There's a lot of interest in Zambia, and even more so, fantastic interest in KCM. So all around, actually, things are going very nicely, notwithstanding a couple of small hiccups, but really good rapid ramp-up that's happening at KCM as we speak. Thanks, Sunil.
Thank you so much for the detailed answer. So just to come back to VRL, so I just wanted to, can you highlight the maturity broadly for the second half of this fiscal and next three years?
Sure. So if you look at the second half between October through March, so October is already taken care of. What we need between now and the March end, the principal is almost $0.2 billion. It's about $220 million requirement. And interest, almost same number. The requirement at Vedanta Resources in the second half is almost $400 million. As I mentioned, we intend to address most of it through operating free cash flows. And maybe a very small portion through refinancing. So that's the requirement. If you look at next year, FY26, the requirement is almost $820 million in principal and interest. So give and take $1.2 billion-$1.25 billion next year. I would say the outer year FY27 let us park for the moment because we also intend to refinance the remaining bonds. In that case, the maturities will be decluttered and get flattened out.
And so, 27?
27, as I mentioned, right now, it is about $1.1 billion. But once we refinance the remainder bonds, it will come down to a sub-billion. So $0.4 in the current year second half, $820 next year, and about $1.1 billion in FY27.
This is useful. So that was the first part of the question. So secondly, would it be possible for you to indicate broadly on what's happening on bauxite globally, specifically touching upon Guinea and why there is so much of fever and crunch in that global bauxite market? How do you see this playing out over the next six to nine months? That's one. And the second is very encouraging to see that our alumina refinery is ramping up well. But just wanted to understand what is the sort of comfort that we have on sourcing. Earlier, we had indicated OMC can go from three to six. Where are we on that? And if possible, if you could quantify something on the pricing for OMC imports and Sijimali, whenever it comes.
Hi, Ritesh. I'm on this side. Ritesh, first on the alumina. Okay. As I said, that we will be probably a 5 million run rate refinery as we end quarter one, beginning of quarter two. Okay. Now, what you rightly said is around the bauxite. Bauxite also, I'll reiterate that Sijimali will be started in, say, Q1. We plan to get whatever, 4-5 million, or 3-4 million next year from there. You know that the key capacity there is around 9 million. OMC, if you would have quickly done, you know, they are already into the expansion mode. 3 to 4.2, they are already doing expansion. From there, they will go to 6 million tonnes. Between these two, we believe mostly, say, 85%-90%, it should cater to our next year requirements.
We also have some other domestic as well as some small tie-up with Guinea, which should cater the balance. Coming to your issues, what we have recently picked up in Guinea, so we are in touch with EGA with our long-term supplier. We believe that it's a routine customer matter. Nothing to worry. In any case, we have a very small contract, say, around 10%-15% of our requirement, and they should be able to supply it. Ritesh, on a bigger picture, since everyone was talking about the alumina, let me reiterate. Okay, the little bit on the aluminum picture. Now, coming to the volume, we've said that we will start commissioning Balco end of this quarter. Probably by middle of the next year, we should be around 3-3.1 million tons with some debottlenecking done.
The near term, as I said, the cost opportunity lies in alumina ramp-up at Lanjigarh. The power, only from the assets and the efficiency part of it, the materialization. And whatever operational excellence we bring in. With that, we believe the LME, where it is, Premium, we have seen that quarter on quarter, we are growing in high teens. And we believe that with the increased VAP and the domestic sale, we should be doing closer to 300-320 in Q1. If we do the math, acquisition 100 LME, 300-320 of Premium, cost 870, 1800, we should be at $1,200. And multiplied by 3.1, a $4 billion business may be in the quarter two. So Ritesh, thank you.
That's encouraging. Is there any hedge position that we have across businesses right now? If you could quantify volume value, that would be great.
Sure. So let me just cover two large businesses. Now, starting with the zinc business, Zinc India, the hedge quantity in the current year is about 150 KT. And that covers almost our 18% to 18% of the volumes for the full cycle. Out of 150 KT, 50 KT has already unwound in the first half. And as of September end, about 100 KT remains outstanding. That's one. So 150 is the hedge for the full cycle. 50 has unwound. 100 remains outstanding. The hedge value is about $3,000 per ton in case of zinc. Now, coming to aluminum, the hedge quantity is about 190 KT. And that is about 8% volume on an yearly basis. The hedge price is about $2,550, or give and take $2,600 per ton. Out of 190, about 125 remains outstanding as of September end.
About 18% zinc has been hedged in summary at about $3,000 per ton. About 8% aluminum has been hedged at about $2,600 per ton.
This is very useful. Also, can I squeeze one question?
Sure.
Yes. Sir, the last question. Again, sir, how are you looking at the capital structure for both Vedanta and Hindustan Zinc? I'm asking this question in conjunction with the reducing promoter holding at both Vedanta as well as Hindustan Zinc. The reason I asked is, I think the de-leveraging at VRL has progressed at a pretty good pace. And still, we are seeing some offloading from the promoters for both the entities. So it gives a bit of a conflicting signal. So how should one look at that particular variable?
I would say, at least it's a twofold investigation as to dimensions. Firstly, in terms of structuring, holdings of VRL as in promoters in Vedanta Limited. We believe, as a group, with the current holding of 56.4%, we are quite comfortable. I don't think there is an intention right now to dilute more or acquire more. The current stakes should continue. One can also look at the current holding in the context of demerger. As we all believe, there is a preponderance of opinion where everybody believes post demerger, the sum of the parts will be more than the whole. Hence, maybe stake valuation post demerger perhaps will be more beneficial. We foresee the holding of VRL in VDL or VDL in zinc in the near future will not materially alter.
Secondly, on the debt side, again, I'd like to also comment that Vedanta Resources, our intent is to go down to $3 billion over three years, starting the current cycle. So from current $5.8 billion at the year beginning, we'll go down to $3 billion by end of 2027. At Vedanta Limited, since it's an operating company, it will not be appropriate to ascribe an absolute value in the growth environment. And hence, one should look at net debt to EBITDA at Vedanta Limited. Right now, at 1.49x, it is set to go down to less than 1x, where EBITDA at Vedanta will be more than the debt. So in summary, the holding structure will remain more or less same in the near future, demerger being the context. Debt viewpoint, we are in less than $3 billion debt at Vedanta Limited. Net debt to EBITDA will be less than 1x.
Thank you so much for the elaborate answers. All the very best. Thank you.
Thank you. We'll take our next question from the line of Indrajit Agarwal from CLSA. Please go ahead.
Hi, good evening. Thank you for the opportunity and congratulations on a good set of numbers in a challenging quarter. Most of my questions are answered. I have two questions. One, on the reversal that we had on oil and gas business, is there any tax incidence on it, or is it just a book entry? Is there any cash tax impact of this?
We have to, of course, once we reverse the provision, Indrajit, we also create a deferred DTA on that. It's only a book entry. There is no cash tax implication.
Sure. That's helpful, and second is on your notes to accounts number six on the AvanStrate business where you have bought out the holding of Hoya. So what was the outgo because of this? And you mentioned about you want to reorganize the capital structure. So what could be the payout on this? What is the intent and CapEx that we can have here?
Yeah, sure. So right, the AvanStrate used to be almost 51% holding until the remainder stake by our Guinea partner, Hoya, we bought sometime in the current system. With holding stake, bypass our holding at AvanStrate ASI is almost 10%. It's around 99%. The total payout is about $88 million, out of which $66 million have been paid by sale of materials at ASI, AvanStrate. So ASI was holding some metals which have been locally sold and paid to Hoya out of $88 million. Balance $22 million is paid by ASI's holding company, CIHL. So cash $22 million, $66 million is to metal sale.
Sure, and you talk about net debt in the capital structure. So if you can lay out some plans in the next two, three years, what kind of CapEx you can see over there?
I believe the glass business will be a wonderful business. And right now, there are four large players globally. And Vedanta post that stake acquisition, we want to recapitalize the business, rebuild the furnace, more so in our AvanStrate operation. And that's more actions we will see in the current quarter. From incremental profit viewpoint, this business has great potential. Secondly, as we have seen in terms of our domestic application with the government on the display side, so between ASI, AvanStrate, and VDL, the glass business will have great synergies in the future.
Sure. That's all from my side. Thank you so much.
Thank you.
Thank you. We'll take a next question from the line of Raashi Chopra from Citi. Please go ahead.
Thank you. I just wanted to reconfirm some numbers that you gave regarding the debt at the parent level. Now, the $220 million of debt and $220 million of interest payment is due for the remaining FY25. In FY26, you said that the loan amount due was $820 million and $1.1 billion in FY27. Is that correct?
That's correct. So current year, second half, Raashi, the principal is 220, interest almost 200. Total requirement about 400. FY26 next year, the principal loan is 820 and interest will be 550, so about 1.3. And FY27, about 1.1 principal. And I will urge that let us not look at right now FY27. For Vedanta Resources, multiple refinancing of bond has taken place in the previous quarter, and more will come. So the entire debt wall at Vedanta Resources will be far more decluttered in the near future. But as of now, number is 1.1 in FY27.
Okay. That's right. And essentially, you said that in the repayment that you have, that the $4.8 billion has broken up, $3 billion is bonds which you will refinance, $1 billion is bank loans which will be a mix of refinance and repayment, and $850 million is the private facility. So out of that $850 million, that is due in April 2025. Is that correct?
Out of the 850, 400 is due in April, and that also is a link with a brand fee that is anyways due in April, so out of 850, 400 gets paid in April. Thereafter, this loan also has a Non-Call clause, the lock-in, which is set to end sometime in August next year, so we intend, and this is a high-cost debt, Raashi, so we intend to repay this once NICOL gets over sometime August next year.
Got it. And just for FY27, on FY26, the 820 plus the 550, what is the funding breakup for this? Planned funding breakup? In a sense, how much is from brand fee, how much is dividend, etc.?
I would say that if you look at brand fee, what we paid in the current year, FY25, it is almost 400. Now, with the higher volume and hopefully the better pricing, that 400 can become 450 or thereabouts. Almost half will be met through brand fee, and the remainder will be dividends. As I mentioned, going forward, brand fee should be equal to the interest cost at Vedanta Resources. With the flattened maturities, a routine dividend where the receipt at VRL, give or take 70 million, should take the principal. It will be a mix of brand fee and a normalized dividend next year.
Got it. Thank you. And at the India level, your repayment due for the remaining part of FY25 is how much? And Vedanta India.
If I just speak of Vedanta Limited standalone, so it is about INR 2,700 in current quarter and about INR 5,800 in the fourth quarter. So total about INR 8,000 crores, $1 billion in the second half. Now, as you know, at Vedanta Limited, almost entire debt is secured. And with our current operating free cash flows, repayment and refinancing, knowing it is secured, is an option. So, in terms of debt maturity servicing, it is far different than Vedanta Resources.
Got it. Thank you. And just lastly, on alumina, I just wanted to check that when you go to the run rate of about three million per alumina, that would make you captive at about 60%-65%. So for the remaining 35% or so, how much is spot? And you said you don't have much spot purchase. So between spot and long term, what is the split? Very roughly.
60, 40. 60 would be long term.
Got it. Okay. Thank you.
Thank you.
Thank you. Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to Ms. Prerna Halwasiya for closing comments. Over to you.
Yes, Rashi. I would like to thank you all for taking time to join this call today. I hope we were able to answer most of your questions. In case you have any further questions, please feel free to reach out to us. This concludes today's call. Thank you, everyone.
Thank you.
Thank you. On behalf of Vedanta Group, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.