Vedanta lines up $6 billion across businesses to drive revenue growth

Mining conglomerate Vedanta Ltd will invest $6 billion across businesses that span from aluminium and zinc to iron ore, steel and oil and gas as it looks to add at least $2.5 billion to annual EBITDA, its executives said in an investor meeting.

It 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, they added.

Vedanta Chairman Anil Agarwal, according to a presentation made at the investor meeting, said the company "will get to a different level in the next 25 years".

His brother and vice chairman Naveen Agarwal gave details of the plans.

"Projects (are) under execution to deliver $7.5+ billion yearly EBITDA," he said, adding $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 continuously explore options to create additional value at all our sites. 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 atCO to 1 million tonnes, commissioning of the Athena and Meenakshi power plants to almost double the commercial power portfolio to 5 GW, 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.

"40+ 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 (April 2025 to March 2025)," Vedanta said in the presentations.

Stating that deleveraging was its "utmost priority", it said a $3 billion deleveraging over the next three years has been firmed up at parent Vedanta Resources without an increase in debt levels at the India-listed firm.

Net debt is being targeted to be cut to $9 billion by FY27 from $13 billion now, its CFO Ajay Goel said, adding 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.

Billionaire Anil Agarwal-owned 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.

"The demerger is expected to simplify the Group's corporate structure with sector-focused independent businesses. Each of our businesses is at a global scale hence, the board decided to go for a demerger. We intend to build an asset ownership and entrepreneurship mindset where each company would chart out its growth trajectory.

"The demerger will give global investors, including sovereign wealth funds, retail investors, and strategic investors, direct investment opportunities in dedicated pure-play companies," Vedanta had said in its demerger announcement.

Chris Griffith, CEO of Vedanta Base Metal, said Zinc International is targeting a 1 million tonne production pipeline by 2030 from the current 2,20,000 tonnes through expansions at Black Mountain and Gamsberg mines in South Africa.

Copper India is targeting to create a 1 million tonne capacity for copper and gold production per annum by 2030 from the current 2,60,000 tonnes through debottlenecking the Silvassa refinery, units in UAE and Saudi Arabia and restarting the Tuticorin unit.

Vibhav Agarwal, CEO of the power business of the company, at the investor meeting, said the group has a portfolio of 4,780 megawatt of electricity generation capacity, which will by FY27 (April 2026 to March 2027) generate Rs 15,000 crore of revenue and Rs 3,500 crore of EBITDA annually compared to Rs 6,910 crore revenue and Rs 1,050 crore EBITDA in the current fiscal.