'Will get to a different level in 25 yrs,' says Anil Agarwal as Vedanta plans $6 bn investment, eyes $7.5 bn EBITDA by 2027

Mining conglomerate Vedanta Ltd will invest $6 billion across businesses as it looks to add at least $2.5 billion to annual EBITDA, its executives said in an investor meeting as per news agency PTI. The business leaders said Vedanta has a pipeline of more than 50 active projects and expansions to drive growth, which is expected to generate incremental revenue of over $6 billion and boost EBITDA from an expected $5 billion in the current fiscal ending March 31 to $6 billion in the next and up to $7.5 billion by FY27.

Vedanta Chairman Anil Agarwal said the company "will get to a different level in the next 25 years".

His brother and vice chairman Naveen Agarwal said that the projects are under execution to deliver $7.5+ billion yearly EBITDA and $6 billion is being invested across business verticals that will potentially yield incremental revenues of $6 billion and "incremental yearly EBITDA potential of $2.5-3 billion".

"We currently have several high-impact projects in execution mode across all our businesses. These will further contribute to our cost leadership while substantially increasing our operating capacities. These levers will help drive our EBITDA towards the stated target of $7.5 billion annually," he said.

Some of the significant projects due for immediate commissioning include a refinery expansion at the Lanjigarh Aluminium facility from 2 million tonnes per annum to 5 million tonnes, expansion at BALCO to 1 million tonnes, and commissioning of the Athena and Meenakshi power plants to almost double the commercial power portfolio to 5 GW.

Vedanta is also working on capacity expansion at Gamsberg Zinc facility to take Zinc International capacity to 5,00,000 tonnes from 2,73,000 tonnes now, raising iron ore production from 5.3 million tonnes to 13 million tonnes, and becoming India's largest ferro-alloys producer with a 5,00,000 tonnes per annum capacity.

In the presentation, Vedanta, whose business spans from aluminium and zinc to iron ore, steel and oil and gas, said that 40-plus ongoing growth projects with a plan to spend $6 billion in capex will help boost EBITDA from an estimated $5 billion in the current fiscal ending March 31 to $7.5 billion in FY26.

Vedanta Group CFO Ajay Goel said net debt is being targeted to be cut to $9 billion by FY27 from $13 billion now and that parent Vedanta Resources has de-leveraged balance sheet by $3.5 billion in the last two years to bring down net debt to $6 billion and has "reprofiled and smoothened near-term bond maturities of around $4 billion".

"Vedanta Limited cash flow pre-growth capex is estimated to be $3.5-4.0 billion for FY25, sufficient for secured debt maturities of $1.5 billion with refinancing as an additional option," he said. Parent "Vedanta Resources' maturities of $1.1 billion in FY25 will be addressed partially by internal accrual and partly by other key strategic actions, such as asset monetisation."

Pitching the company as an 'investment proposition', the presentation said Vedanta has delivered over 15 per cent CAGR in EBITDA over two decades, while 30 per cent was the five-year average EBITDA margin. The proposed demerger of businesses is a "significant value unlocking for our shareholders," it said.

Vedanta Limited has a unique portfolio of assets among Indian and global companies with metals and minerals - zinc, silver, lead, aluminium, chromium, copper, nickel; oil and gas; a traditional ferrous vertical, including iron ore and steel; and power, including coal and renewable energy; and is now foraying into the manufacturing of semiconductors and display glass.

The company on September 29, 2023, announced the creation of independent verticals through the demerger of underlying companies, mainly its metals, power, aluminium, and oil and gas businesses to unlock potential value. As part of the vertical split of Vedanta Ltd, shareholders will get 1 share of each of the five newly listed companies for every 1 share of Vedanta.

After the demerger, the businesses of Hindustan Zinc as well as the display and semiconductor manufacturing units will remain with Vedanta Limited.

In the third quarter of FY 2023-24, Vedanta recorded an 18.3 per cent decline in consolidated net profit at Rs 2,013 crore. It had posted a consolidated net profit of Rs 2,464 crore in the year-ago period. However, the company's consolidated income in the third quarter of the current fiscal increased to Rs 36,320 crore from Rs 34,818 crore in the same period a year ago.

Vedanta's CFO Goel said on a sequential basis, the December quarter was one of the best quarters for the company. "The EBITDA for the quarter is Rs 8,677 crore. It is 21 per higher over quarter on quarter," he said. In the current quarter, the company's PAT before exceptional items is Rs 8,268 crore which is 112 per cent higher than in the previous quarter, he added.

(With inputs from PTI)