Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Quarterly EBITDA surged by 47% to INR10,275 crores, showcasing strong financial performance.
- EBITDA margin increased significantly from 24% to 34%, indicating improved operational efficiency.
- Profit after tax rose sharply by 54% year-on-year to INR5,095 crores.
- Vedanta Ltd (BOM:500295, Financial) achieved a 20% reduction in overall costs year-on-year.
- The company is making significant strides in sustainability, with Hindustan Zinc and Vedanta Aluminum ranking first among their global peers in sustainability assessments.
Negative Points
- The national election caused delays in labor availability, impacting project timelines.
- Approval processes for coal mining have slowed down due to changes in government, potentially delaying project execution.
- The company faces challenges with declining production in mature oil and gas fields, requiring significant investment in infill drilling and ASP injection.
- High alumina prices have increased production costs, affecting profitability in the short term.
- The demerger process, while strategic, involves regulatory hurdles and uncertainties that could impact timelines.
Q & A Highlights
Q: Congratulations for a great set of numbers. I have two questions. The first one is on the aluminum division. I understand that there are quite a few milestones in Q2 FY25, including commencement of mining in Radhikapur and [Kurloi] plus the second train of alumina refinery being launched. So just wanted to understand your update on each of these, just BALCO expansion aspect?
A: Thanks, Amit. I will, of course, ask first John or maybe Steve first to address the oil and gas, and John in aluminum. But a broader comment, Amit, that while your question around in this month or which period will the refineries start this month, which period will the coal mining start. While relevant, but the way we look at this is that structurally, we have addressed this, and now it's a matter of execution. It may take a month here or quarter here. But we -- from our point of view, the refinery has been -- it is last stages of commissioning, both Train 1 and Train 2. It may happen one-month earlier, one-month later, but we don't step over that. So that is to happen in any case. As far as coal mining is concerned, similarly, we have started to work on the coal mine. It may happen one month early, one month delayed. But we know that the -- all this integration of coal, alumina oxide is in the execution space and will start getting -- start commencing. But let me get Steve on the -- Steve are you on?
Q: The second question is on oil and gas, essentially. So while in the PPT, it was mentioned that we have initiated the ASP injection at Mangala, and we saw that the preparation was going on when you will take the site as well. So I just wanted to understand whether in Q2, we will finally see that the production from oil and gas would increase because we have drilled infill wells. So because as a combination this infill strategy plus your ASP, could we see production creeping up finally in Q2 of FY25? These are my two questions.
A: Yes, I got it. Yes, let me give the answer. Yes. Thank you, Amit, for the question. So yes, you're right, obviously, our production have been declining. We are obviously producing most of our oil and gas from very mature fields, 15 to 25 years old. We have a natural decline of about 20% per year with no infill drilling. We are infill drilling modestly at the moment in Rajasthan and maintaining the decline at about 15%. Obviously, that isn't acceptable. We want to bring the production up. We've got a huge reserve base and resource base to draw upon. And phenomenal expiration portfolio that's going to add to the reserve and resources. So ASP, you mentioned, is one of the key technologies. We've kicked off the first stage finally after many years delay in Mangala. ASP been injected into the ground. And we should be over the next few months because we're putting it into a pattern, which should respond quite quickly. The gradual increase. But remember, this is the first part of a very large project. The second stage will kick off early next year. My expectation for second quarter is we're going to be quite flat. So we did [112,000] in the first quarter. We're going to be sitting in [112,000, 113,000] in the second quarter. Third and fourth, we'll start to see the gains, not just from the ASP, but also from the additional infill drilling because we're mobilizing rigs to both the East and the West Coast. Our biggest infill opportunities are actually offshore rather than onshore, but that production should start to come in during the year. We've also got five more wells scheduled in the gas plant. It should start to coming towards the end of the year. So we're looking at an end rate -- leading the financial year, 130,000 to 140,000 barrels a day. And that's all of that work coming in. Beyond that, obviously, we've got a lot of exploration ongoing. We've got the rigs that are coming on the East and West Coast, not just doing infill, but doing exploration, which will hopefully produce more satellite fields. We've got five satellites that's already discovered. Field development plan is sanctioned, both onshore and offshore. They will start to produce oil and gas in. We've got the ongoing exploration in the North, where we've got two rigs drilling. We've got a rig in Rajasthan drilling. We're bringing a second rig right into Rajasthan, heavy-duty rig to focus on our deeper prospectivity, particularly gas prospectivity around the RDG plant, which as you know, has a lot of spare capacity at the moment. Our aimed to fill that up, get it back to doing 35,000, 40,000 barrels a day oil equivalent as soon as possible. We've got an ambitious program on the unconventionals in Rajasthan. And as Navin said, we're aggressively looking at our deepwater and we're negotiating to bring a rig in to drill some deepwater appraisal wells and doing development studies at the moment. So I think a modest target of 300,000 is quite modest. I think the portfolio we've got; it was in another company. We would be looking at a target of [500 to 600]. But in the short-term, by the end of this year, we should leave the year 130,000 to 140,000.
Q: Many congratulations on the [Basel], sir. I have two, three questions. One, over the last one quarter, we have seen different measures taken by the company and at the Vedanta Limited level as well as Vedanta Resources level to improve the liquidity, and which we have successfully done. Now my question is whether we are still looking to improve liquidity besides cash flows or any other major besides cash flows? Or we are done away with that? And with that, how much our --
A: Thanks, Ashish. So we'll answer your question first on the NCLT demerger. In our mind, having file with NCLT, which is the last process in a way, we think that this is for us a final step. But Ajay Agarwal, if you're on, do you want to respond in any other way to Ashish?
Q: Yes. So with that, obviously, how much weighted average cost of debt we think should come down from the current level of something like [10 plus]? That's one. Second was because we have already filed with NCLT regarding this demerger. So are we seeing any bottlenecks from the regulatory side or is there any possibility that we can go back from this now or it will be definitely be a done deal? That's my second thing. And third was, is it possible to share what would be the global aluminum cost curve for us -- for global aluminum cost, so that we can get a sense on where we are in aluminum prices? Yes.
A: Yes, Vice Chairman
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
