Vedanta Limited (VEDL) Q2 FY23 Earnings Concall Transcript

Vedanta Limited (NSE:VEDL) Q2 FY23 Earnings Concall dated Oct. 28, 2022

Corporate Participants:

Sandeep Agarwal — Head Investor Relations

Sunil Duggal — Whole-time Director & Chief Executive Officer

Ajay Goel — Acting Chief Financial Officer

Prachur Sah — Deputy Chief Executive Officer, Cairn Oil & Gas

Analysts:

Indrajit Agarwal — CLSA — Analyst

Amit Dixit — ICICI Securities — Analyst

Ritesh Shah — Investec — Analyst

Pallav Agarwal — Antique Stock — Analyst

Ashish Kejriwal — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q2 and H1 FY ’23 Earnings Conference Call of Vedanta Limited. [Operator Instructions]

I now hand the conference over to Mr. Sandeep Agarwal, Head Investor Relations at Vedanta Limited. Thank you and over to you, sir.

Sandeep Agarwal — Head Investor Relations

Thank you, Steven and hello, everyone. I’m Sandeep Agarwal. It’s a pleasure to welcome you all to Vedanta’s Q2 FY ’23 earnings call. An audio archive and transcript of this call will be made available on our website. The financial statements, press release and presentation are already on our website. From our leadership today we have with us Mr. Sunil Duggal, our Group CFO; Mr. Ajay Goel, Acting Group CFO. We are also joined by leaders from our key businesses. Mr. Arun Misra, CEO Zinc Business; Mr. Prachur Sah, Deputy CEO, Oil & Gas.

Please note today’s entire decision will be covered by the cautionary statement on Slide 2 of the presentation. We will start with update on operational and financial performance and then we will open the floor for questions-and-answers.

Now, without further ado. I would like to have hand over the call to Sunil Duggal.

Sunil Duggal — Whole-time Director & Chief Executive Officer

Thank you, Sandeep. Good evening, everyone. Thank you for joining our second quarter earning call. You all are aware that the global economy has recently been facing certain macroeconomic challenges emanating from Ukraine/Russia war, broadening inflationary pressures and early shock, foot shortage, appreciating dollar and so on. Most of the central banks have been tightening monetary policies to tame inflation. These near-term macro challenges have wear down commodity prices during the quarter. Despite these macro challenges, we have delivered strong operational performance with production growth in key businesses and cost optimization during the quarter.

We have achieved consolidated EBITDA of INR8,038 crore. This along with structural streamlining of working capital investment helped us to generate a robust free cash flow of INR8,369 crores. Our center of excellence designed around quality asset optimization, digital transformation, are helping us to capture full potential of our asset. Our growth and vertical integration projects aimed at reduced market volatility impact are progressing very well. Now we have six coal mines which have 40 tonne per annum plus production potential along with two recently won mines. These mines will be more than sufficient to take care of entire coal requirement of aluminum business and help us to make it structurally strong. All these levers will make Vedanta stronger to deliver sustainable and predictable performance across all cycles and create stakeholder value. We remain committed to create value for our shareholders. In first half of financial year, we have distributed dividend of INR51 per share, which translates into a dividend yield of 15.4%, one of the best among peers. Vedanta Group is one of the highest contributor to Indian exchequer with 37,180 crore contribution in the first half of financial year.

In our pursuit to uplift people’s lives, we have reached the milestone of 3,600 Nand Ghars For women and child welfare. Our Balco Medical Centre has also signed MOU with Tata Memorial Centre to drive talents in cancer care. Our ESG program has been progressing very well. I’m happy to share that Vedanta has entered into the exclusive club of Top 10 DJSI ranked global metals and mining companies, ranked sixth globally, with strong 14 point score improvement. Under pillar of Transforming the Planet, we are on track to achieve 2.5 gigawatt renewal energy target. We have issued EOI for additional 500 megawatt RE procurement government. HZL Pantnagar is now our first unit to run entirely on renewable energy. Cairn and iron ore business has achieved third-party assurance for water positivity. We are also making steady progress on waste utilization in R&D for new technologies.

In continuation to our industry-leading people practices on diversity and inclusion, we have identified 120 women leaders who are being developed for future CXO roles. We are launching [Indecipherable] a program for women leadership development in third quarter.

Now, let us move to the business verticals. Coming first to the aluminum business, we completed Jharsuguda capacity ramp-up to 1.8 million tonne per annum. Our aluminum production grew by 2% YoY and 3% quarter-over-quarter. Our quarterly CoP reduced by 8% to $2,429 per ton. We have started Chotia coal mine operation in September 2022 to rationalize our coal cost. Our linkage coal materialization also improved from 22% to 55% in the quarter. We now have availability, pre-kept the rigs on daily basis which move the material or coal from mine to plant. We continue to focus on volume growth and vertical integration projects to this business, sustainable and predictable across all cycles.

Coming to Zinc India, it achieved its best-ever second quarter refined metal production of 246 kt up 18% YoY wireline driven by improved smelter performance and better mined metal availability. Silver production grew by 28% YoY. The operations have overcome quarterly variation and are now sustainably add one million ton per annum plus run rate. The next focus is to achieve 1.2 million ton per annum run rate in the near future. Coming to Zinc International, Gamsberg recorded highest-ever quarterly energy production of 55 kt with 43% YoY increase, driven by higher ore production and zinc recoveries. Cost of production also improved through potential operational efficiency. We have successfully gone through learning curve to handle the difficult ore and now operating at about 300 ktpa run rate in the current quarter. With Gamsberg Phase 2 expansion, Zinc International will be among the largest operations globally at 500 ktpa plus size of operations.

In Oil & Gas business, our average gross operated production was 141 KBOPD [Phonetic]. Natural production decline was partially offset by infilled wells in MB1 and RDZ2 field. We are focused on delivery of growth project. We have booked up eight wells during the quarter. Opex increased by $0.5 per barrel QoQ to $13.5 per better due to increase in polymer prices and maintenance activities. We continue to engage with government on special excise duty.

Within the framework of PSC and RSV, I’m pleased to inform you that government has extended PSC far our Rajasthan block for another 10 years. We established shale potential, we have partnered with Halliburton and Schlumberger to build pilot wells environment. Our Cambay infill campaign is looking promising. The third well came online in September and has helped increase production from 9 K to 12 K barrels per day. The business secured eight blocks in discovered small fields in round three and one coal bed methane block in special CBM round 2021 across on land and offshore regions.

Coming to iron ore, our Karnataka sales increase by 7% YoY. Though prices remain under pressure. because of the export duty, pig iron production was lower on YoY basis due to shutdown of smaller blast furnace. The Government of India imposed import duty on iron ore, pig iron among others. This impacted our realization and our margin fell 88% sequentially. However, we have depleted high-cost inventory quarter two and see cost reduction in quarter three. We’ve successfully started overproduction in our Liberia mine in July. We are planning our first shipments in current quarter.

In steel, saleable production grew 11% YoY to 324 KT with the completion of debottlenecking activities as shared in July. EBITDA margin was majorly impacted from export duty imposition, driven steel price decline and high priced coking coal inventory materialization in this quarter.

In FACOR, ore production grew 43% YoY due to operational efficiency. Ferrochrome production were lower by 42% YoY on account of shutdown taken for realigning of furnace and it’s debottlenecking. Further growth in lined up with 60 KT of furnace commissioning by December ’22 at the capex of INR200 crore, which will take the total capacity of FACOR from 75 KT to 150 KT. In term of outlook, you may have noted that aluminum, zinc and lead production cuts haven’t continued in Europe amidst high energy cost. Energy shortage in some of the Chinese provinces is also impacting metal supply. We also expect Chinese government stimulus effort to boost commodity demand while Indian economy has not fully insulated from the global events. It is relatively resilient as reflected by strong industrial production, export competitiveness, tax collection, warrant, and non-food credit growth. Indian government increased capital expenditure continues to support demand. Indian economy is projected to grow at a robust of 6.8% in 2023, fasted amongst the major global economies.

Following the monsoon lull, construction activity has restarted and consumer durable market is vibrant now. This augurs well for metal demand in India. India being our largest market, it’s continued strength bodes well for our business performance. We have an outstanding foundation of world-class long-life and low-cost assets, producing vital commodities to our global decarbonization transition. With a rich diversified asset portfolio and strong balance sheet, we remain well-positioned to benefit from the global mega trends of decarbonization and energy transition and which can be challenging macroeconomic environment.

With this now. I would like to hand over the microphone to my colleague and friend CFO Ajay Goel for financial performance.

Ajay Goel — Acting Chief Financial Officer

Thank you, Sunil, and good evening everyone.

The macro operating environment in the quarter was quite mixed with the softening of the prices, input inflation, and the various fiscal and monetary policy changes. The Indian economy though is far better positioned compared to global peers. India’s outlook has been optimistic towards domestic consumption, which is evident in several economic indicators. The commodities indexes are also flattening and cooling off in many cases. The impact of tightening monetary policies by central banks is likely to bring positive results in coming quarters. This quarter, we have pursued various initiatives, which resulted in strong performance despite input inflation and softening prices on output side.

Our businesses have delivered strong quarterly revenue and very robust free cash flow before capex, which was driven by working capital initiatives, where we have reduced the number of days, structurally by 15% [Phonetic] quarter-on-quarter and optimized inventory. This should continue to benefit us in terms of cash in coming quarters. Our focus remained on attractive returns to shareholders with highest ever 15.4% dividend yield. Our leverage stays as best amongst Indian peers at 0.7 times with a strong ROCE of 28%. I’m happy to share that we are progressing well on deleveraging commitment at holdco which is $4 billion over next three years. We have deleveraged the holdco in the first half of the year by $1.4 billion.

The Q2 results are very clearly is the reflection of operating environment and some of the key financial highlights on the quarter are consol quarterly revenue of INR36,237 crores, up 21% YoY. Quarterly EBITDA of INR8,038 crores, lower 24% YoY, the strong EBITDA margin of 25%. Free cash flow before capex of INR8,369 crores and we would note that the free cash flow free capex for the quarter is more than 10% of EBITDA, so the EBITDA-to-cash conversion ratio has improved almost 2 times of the recent past.

ROCE of 28% which is higher by 2% of last year’s number of 26%. We continue to maintain healthy cash and cash equivalents of INR26,543 [Phonetic] crores with net debt-to-EBITDA leverage ratio of 0.70 times, maintained at low levels amongst all Indian peers. Finally, we paid the second interim dividend of INR19.5 per share amounting to INR11,249 crores in the second-quarter, which takes total dividend payout for the first half at INR51 per share that amounts to almost INR18,933 crores, one of the best dividend paying company in India. We have an income statement in the appendix, Page Number 30, where you can find more information against each line of profit and loss account.

I wish to state that our ETR guidance for the full-year will be around 30% now against 28% earlier. This change is driven by movement in profit mix amongst the various businesses.

Now, I move to EBITDA bridge. As clear from the EBITDA bridge quarter-on-quarter, the impact of market-driven factors has been partially set off through better volumes across businesses and lowering of cost impact through several measures on cost, with also input prices also tapering in second quarter. We were also benefited from strategic hedging which helped us to some extent in navigating the tumultuous pricing. Similarly, if you see the EBITDA bridge YoY what is last year, the major impact is coming from market-driven factors led by the macroeconomic environment and inflation which was partly offset by increased operational performance thanks to strategic hedging.

Moving on to the page on net debt. The net debt as on September 30th stands at about INR30,144 crores [Phonetic]. Again on net debt bridge as I mentioned at the beginning, through various initiatives, we have improved working capital which resulted in strong free cash flows before growth capex amounting to INR8,369 crores. This enabled us to declare interim dividend in second quarter. The increase in net debt in Q2 sequentially quarter-on-quarter was due to amount invested in capex in second quarter through borrowed positions.

Moving over to balance sheet now, our balance sheet remains resilient, providing both protection and optionality for growth. We achieved net debt-to-EBITDA as I mentioned 0.7 times, well within the range of our capital allocation framework and best amongst Indian peers. Our average maturity maintained at above 3.8 years with average cost of borrowing at about 7.7%. Our credit rating continues to be at AA with a stable outlook, both by India Ratings and CRISIL. We are investing for future, both in terms of value-driven growth and positioning the portfolio for longer-term demand themes, while remain committed to capital allocation discipline. Our capex programs are on track as planned. We have spent $0.6 billion in the first half of the year on capex. On full-year basis, we are revising the growth capex guidance for aluminum business to $0.6 billion from $1 billion which is in line with cash outlay estimates. All growth capex programs for aluminum remain on-track as planned. With this fully year growth capex guidance now stands at $1.6 billion.

I’m happy to share that Vedanta was recently awarded the Golden Peacock Global Award 2022 [Phonetic]for excellence in corporate governance. Lastly, I’d like to reiterate we have an outstanding portfolio of long-term assets and expertise to invest in growth, in delivering vital commodities for a low-carbon future and continue to pay handsome dividend. We will continue to challenge ourselves and deliver goods across various cycles.

With this, I hand over the mic back to the operator for Q&A. Thank you.

Questions and Answers:

Operator

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Indrajit Agarwal from CLSA. Please go ahead.

Indrajit Agarwal — CLSA — Analyst

Hi. Good evening. Thank you for the opportunity. I have two questions. The first is a two-part question. First, you mentioned about 40 million ton capacity of coal blocks that we have won so far. So if you can give us some guidance as to what will be the cost of production of these and what kind of savings we can expect from that. Second part is more near term. You have like about $2,150 to $2,250 aluminum cost of production for second half which is about $200 lower than the current quarter, second quarter, so what would drive this cost reduction? Is it more linkage coal availability?

And my last question is on the holdco level, if you can remind us again what is the repayment due for rest of FY ’23 and also in FY ’24. Thank you. That’s all from me.

Sunil Duggal — Whole-time Director & Chief Executive Officer

Thank you. I’ll take your first question. So as you rightly said that we have now six coal blocks locked. For Jharsuguda, we attach Jamkhani, Radhikapur, Kurloi and Ghogharpalli. For Balco, we attach Chotia and Barra. As we speak today, the Chotia mining operative and started feeding coal to Balco. Jamkhani is about to commission and start production any day from now. All regulatory clearances are in place. 90%, 95% percent land is in our hand now and we are about to put the shovel in the ground. So it will start feeding the coal to Jharsuguda plant very soon.

But apart from that, you are aware that Radhikapur and Kurloi mine which we had won earlier, but the potential progress which has happened, including mine plan approval, moving for forest diversion, environment clearance, negotiation taking place for the land process, taking place for the acquisition of the land. You also know that in the last quarter we have won Ghogharpalli mine. Ghogharpalli mine has a mine reserve of around 1.2 billion tonne and the license capacity of this minus is 20 million tonne. But this mine has a capacity even to go to 30 million tonne. So Barra is a very recent block which we have won. It is more like a exploration block, but as the data we have, it has a geological reserve of around 900 million tonne. So this can easily produce 10 million tonne to 15 million tonne per annum, so in total, it would take a very conservative capacity to 40 million tonne, 45 million tonne, but the full capacity from these mines is around 60 million tonnes.

So even if we have a risk that how much long or what risk is there to make these mines operational, we should be able to get the security of 30 million tonne, 35 million tonne, not very far off from today and we have made a year-wise plan that how the mines are going to open up and the coal will be fed. From the year, it will start feeding the coal maybe from the current year, there is a progressive reduction which is going to take place from, say, INR0.9 per GCV to INR0.5 per GCV, so there is going to be a substantial reduction in the cost in three years from today. This is against current cost of INR1.20, INR1.30 which we have in the current quarter, but if we actually work out the power cost at INR0.5, it comes to somewhere between $325 or so per tonne against more than $1,000 of the power cost which we had in the last quarter. So there is way very solid plan of how the fuel prices are going to be controlled in the coming year. So what was the second question?

Indrajit Agarwal — CLSA — Analyst

On the near-term cost reduction in aluminum.

Sunil Duggal — Whole-time Director & Chief Executive Officer

So we have given a very conservative [Technical Issues] noticed that we had $240 cost reduction in quarter two. We are looking at a cost reduction of, say, $300, $350 per tonne in quarter three coming from various levers. The last quarter only from the power cost, the reduction — total reduction $240, $170 also from power. And I also mentioned in the talk track that now we have pre-captive rates available with us. With the three captive rigs which are available with us, we’re able to move the substantial quantity of coal to Jharsuguda. So this will not only help us to get more linkage coal, but also help us to reduce the logistic costs, so because in quarter two, we got the option for moving the call by road and we already linkage improved from 32% to 55%, the reduction of power cost to that extent has not happened which, I think, will have a much higher impact this quarter. But apart from that, there are other initiatives or the operational efficiency, but the CP Coke, CP Pitch prices are also going to get control that we have certain strategy around how these prices will be brought down. Of course, with the depletion of the high-cost alumina and getting into the cycle where we have been alumina available at current prices.

A combination of these three factors, I believe that we should have a cost reduction of $300, $400 in the current quarter.

Ajay Goel — Acting Chief Financial Officer

On the third question, Indrajit, in terms of the holdco debt, I mean what we can do, we can look at total liabilities which is a combination of loans, bonds, including the interest and the cost. If you look at the current fiscal ’23 H1, the total liabilities are about $3 billion, out of which [Indecipherable] there are two dividends and the balance amount to $1.3 billion at VRL got refinanced mostly through Indian POC [Phonetic] bankers with longer-term maturities and the lower-cost. So net-net in H1, there is $3 billion liabilities almost $1.4 billion as I mentioned initially have been deleveraged. Since firs half the VRL debt came down from $9.7 billion to $8.3 billion. In second, the liabilities including interest cost is about $1 billion, which will be again mostly get refinanced. So overall in the current fiscal, almost $4 billion odd, a combination of loans, bonds, interest cost and $1.4 billion is deleveraging. Now F ’24, again, it is more or less same. So $3 billion is liabilities, loans, and the bonds with interest cost. So $4 billion is the maturity in F ’24.

I just wish to make one point that the F ’22 and F ’23 most of the VRL debt did also emanate from the loans taken for increasing the stake which were mostly unsecured and which is getting repaid in second half. Coming F ’24, most of maturities are from secured buckets which are easier to refund, net debt so $4 billion in both the years and deleveraging of $1.4 billion in the current cycle.

Indrajit Agarwal — CLSA — Analyst

Thank you for your elaborate answer. All the best.

Operator

Thank you. The next question is from the line of Amit Dixit from ICICI Securities. Please go ahead.

Amit Dixit — ICICI Securities — Analyst

Yeah, good evening everyone and congratulations for a good set of numbers in very challenging times. I have just couple of questions. The first one is on essentially the increased capex guidance for Balco expansion. If you could throw some light on the key elements because it is very unlike Vedanta to revise cost of work. So if you could throw light on the key element which has led to this increased capex in Balco. That is the first question.

The second one is on the sharp reduction in oil and gas production guidance. Do you think that you would be able to achieve the FY ’24 number that was laid out in the Analyst Meet in March? So these are the two questions I have.

Sunil Duggal — Whole-time Director & Chief Executive Officer

So I’ll try to — I’ll answer the first question and for second question I’ll also take the help of my colleague and friend who is there on the call, Prachur Sah. So the first question is about the capex cost revision of the Balco project. So this is in two-three parts. As you would remember that we had got the smelter project approved with the similar capacity of billet production. So some capex increase is there because of the various events which have taken place and the commodity prices from the time it has happened, but some cost increases which has happened, but majorly there are two, three things beyond this. One is that primary foundry alloy project which was not a part of the bigger scheme of things and we have seen that what could be the right way or what could be the right product to get the right NEP from the market and the value-added product portfolio should be such that it should be accepted by the market. So we have planned to add a capacity 90 ktpa of primary foundry alloys.

The another factor here is that rolled product earlier the sanction was to increase the capacity from 50 ktpa to 130 ktpa and now we want this capacity to be 180 ktpa. While we are executing the project, our rolled product, we realize that it is good to have this capacity. So 180 ktpa will be the final capacity for the rolled product, 80 kt for PFA, 420 ktpa for billet and along with that the original capacity of 404 of smelter capacity. So this will take the total VAC [Phonetic]capacity to more than 100%, say around 105%. This will fetch us the right premium and will also enable us to serve the market in a wider portfolio and that is why the cost increase on three, four factors, which has happened.

So oil and gas production, while we have been able to majorly correct the decline by doing the project on RDG and well intervention and some production which has also come from Cambay and Ravva, but more to happen and as we speak, we have seen some success in the current month and the next-year guidance will be that depending on the exploration success, but some advantage may also come from ASP and shale. Of course this is going to take some time before these project will realize the volume for us, but Prachur over to you for a little more detailed explanation.

Prachur Sah — Deputy Chief Executive Officer, Cairn Oil & Gas

Thank you, Duggal Ji. So for from a production point of view, in Q2, there was slight impact from production primarily in our NBFCs where we had some impact of a polymer base two where we had to change our operating strategy from our chemical to a mechanical one, but we’ve overcome that and we are currently deployed with Schlumberger and Halliburton to recover the recovery from MDA and as Duggal Ji mentioned, we have drilled offshore now and in offshore we had success in Cambay offshore where we are currently increased the production from 9K to 13k. The Ravva drilling campaign, the first well was successful and the second one which is ongoing or the third one which is ongoing is potentially on the line of success. So in the short term, these are the certain levers that will bring the production back up. In fact in October itself we have seen an uptick of close to 6K is one.

In terms of long term, the exploration results continue and as you have heard that we have got the extension which will unlock the exploration program which was held back during the temporary extension periods, so that should bring back the robustness on the volume growth, as we go into the next year.

Amit Dixit — ICICI Securities — Analyst

So in a nutshell, in NBFCs, the production should come back because these temporary factors are now of the table. It would be correct understanding?

Prachur Sah — Deputy Chief Executive Officer, Cairn Oil & Gas

Yeah so basically the decline — the natural decline would be offset by the temporary and the measures that we are currently taking which is moving to a more mechanical workover compared to the chemical workover that was happening, yes.

Amit Dixit — ICICI Securities — Analyst

Okay, understood. Thanks and all the best.

Sunil Duggal — Whole-time Director & Chief Executive Officer

Thank you.

Operator

The next question is from the line of Ritesh Shah from Investec. Please go ahead.

Ritesh Shah — Investec — Analyst

Hi, sir. Two questions. First question has three parts. Sir first question broadly on capital allocation and GHG. Sir at first some sort of clarification around the news on investments into semiconductor business versus Avanstrate, what is it that you are looking at the company-level, at the parent level. That’s the first thing. Secondly, we have incremental announcements on Athena [Technical Issues] expansion. How do we marry this with ESG. That’s the second on capital allocation and third Hindustan Zinc OFS, where are we on the process. That’s three parts to the first question.

And second question is more on debt profile that we have. Thank you.

Sunil Duggal — Whole-time Director & Chief Executive Officer

So you asked too many questions in two questions. So on semiconductors, I think that entity, we have already declared that, that does not lie under Vedanta as of as of now. I will not be able to comment on that in this call. Although, with it, negotiations and the discussions are going on as we speak and this project is going to hit ground as soon as possible. This was one.

The second, you said that…

Ritesh Shah — Investec — Analyst

Sir, can I just — sir, so semiconductor expansion won’t fall under Vedanta listed entity, is that thing right?

Sunil Duggal — Whole-time Director & Chief Executive Officer

Yes. That’s what we have declared as of now.

Ritesh Shah — Investec — Analyst

Okay. Perfect, sir. Done. Sorry, sir.

Sunil Duggal — Whole-time Director & Chief Executive Officer

Yes. So as far as Athena power is concerned, I don’t think the carbon footprint are going to increase because of that. There is a specific call, which has returned based on the power equation, which will be there for Balco and one of the options is to feed power to Balco new smelter depending on the power equation we maintained through Athena.

So overall, footprints are not going to increase, but you must have also realize the way we are progressing on renewable power. You may not have heard from any other global player because 550 megawatt already signed with Centrica, and there is a lot of progress which has happened in the land acquisition and tying up of the transmission network and the ordering of panels.

And we have also given EOI of 500 megawatt for another set of power requirement in all our locations. So this will be more than 1,000 megawatt against our commitment of 2.5 megawatts by 2030. So in two years, we have moved at quiet a reach. And apart from that, you must have also heard that some of our units like Pantnagar, is completely on renewable power. We have purchased more than 1 billion unit of renewable power in the current year already from various sources.

So our commitment of ESG is above any question. So, we are totally committed, not only on RE, we have made a substantial progress on all the pillars and all the aims, and that is why you must have seen that our DJSI rating has jumped by 14 points. And this is the maximum rating probably you must have seen any jump in any global mining and major mining globally.

So full focus on the biomass usage. There are a lot of other ESG projects which are going on. We have started capturing flare, which was going in the chimneys. We have started generating 4.4 megawatt power out of that. So there are large number of projects which are going on ESG. We have also committed that in the period from 2020 to 2030, we will plant 7 million trees, 2 million trees we have already planted in the last two years. So against a commitment of 7 million in 10 years, 2 million trees are already planted. So there is a lot which is happening in this space.

Ritesh Shah — Investec — Analyst

Sure, sir. Sir, Hindustan Zinc OFS the status check?

Sunil Duggal — Whole-time Director & Chief Executive Officer

That is for the government to answer because what you are hearing from the market, I’m also hearing. They are going for a road show, and we are quite excited to sell it into the market for the OFS to do.

Ajay Goel — Acting Chief Financial Officer

On the last point, Ritesh, if I may answer.

Ritesh Shah — Investec — Analyst

I’ll just refine the question on the maturity. Sir, you did indicate in I think one of the initial questions on $3 billion was taken care of in first half. I just wanted to know the sources for that?

And secondly, in FY 2024, you indicated $3 billion to $1 billion total $4 billion. Just wanted to get a sense on how are we looking to basically fund this? And if you can tie up with two variables, one is the pledges at Vedanta level pledge or income, government at Vedanta level is already nearly 100%. And secondly, GR to RE, I think you already got shareholder’s approval. Are there any other approvals which are pending? And I presume it could be NCLT or something else? And if NCLT gives the approval, do we still need to go for creditors to get approval for them to actually use those funds towards payouts?

Ajay Goel — Acting Chief Financial Officer

Yes. So I’ll try to cover Ritesh, I mean, one of those briefly. So you’re right. So in terms of the H1 current year, we are in maturity of $3 billion. The source remains almost $1.6 billion was dividend. You may have seen we paid two dividend, the first in the first quarter and the second as of current quarter. So $1.6 billion is dividend, $0.2 billion is a brand fee. That makes $1.8 billion, and roughly $1.3 billion is refinancing.

Now one significant change in terms of refinancing remains that most of refinancings in the current year first half is done through Indian PSU banks, including SBI, which comes, of course, at a cheaper rate and the longer maturities. So, dividend brand fee $1.8 billion and $1.3 billion is new loans. H2, as I mentioned, is rather small. It’s about $1 billion, and we don’t see much change. We are in advanced stage of various discussions with both the Indian PSU bankers and a couple of multinational banks. Finally, F ’24 is again almost same number, roughly $3 billion is loans and the bonds, about $1 billion is cost. Most of our 2024 maturities onwards are coming from the secured bucket, as I mentioned and hence, refinancing will not be a challenge.

Right now, Ritesh, the plan for deleveraging of $4 billion over three years remains impact and all other priorities on allocation of capital remains sub-surveyed to this goal.

Quickly lastly, commenting on GR to RE conversion. You may have seen approval from BSC, NSC comment from Citi was taken, until last quarter. We also had, as a second last one court convened meeting, so it is NCLT’s monitored meeting of shareholders and the vote for conversion was upheld with a resounding majority of 99.9%. Now the last step released any approval from lender creators for which we are seeking exemption from NCLT. Once that is done, the whole process will get finished.

Ritesh Shah — Investec — Analyst

Okay. That’s quite helpful. That’s quite — hypothetically — I’ll jump on the queue. I think that’s it.

Operator

Thank you. The next question is from the line of Pallav Agarwal from Antique Stock. Please go ahead.

Pallav Agarwal — Antique Stock — Analyst

Yeah. Good evening, sir. Sir, my question was on the alumina cost for this quarter. So if I look at the cost, it shows it’s in excess of $400. So would it make more sense for us to actually buy more external alumina because those prices would be lower than $400 per tonne at least in the third quarter?

Sunil Duggal — Whole-time Director & Chief Executive Officer

No, I think the overall alumina cost, we decreased — per tonne of hot metal decreased by say, around $9,000 [Phonetic] on the last quarter and alumina and Lanjigarh cost was higher, compared to the previous quarter, because the previous quarter, the one-time — the approval was taken by OMC [Phonetic] for sale of the additional quantity.

And we had some shutdowns also during that quarter. So that differential is there. But — in the current quarter, you will see the cost reduction coming up in the next quarter because of the alumina production from Lanjigarh.

Pallav Agarwal — Antique Stock — Analyst

Okay, sir, so — okay. Yeah, I was, sir, in the copper segment, we reported a, I think, a positive EBITDA, so earlier quarters, you were reporting a loss. So, what has led to this improvement over there?

Sunil Duggal — Whole-time Director & Chief Executive Officer

So, I think we have done few structural changes here. One is that, the overall, the material, the raw material, we have started purchasing the blisters or some secondary material also and we have mastered the art of modifying our process through which the impurities are being addressed. So, this has not only helped us to recover good metal value, like nickel has — fetching us some value which gives the credit to the cost. But apart from that, purifying the solution distribution gives us improved current efficiency that improve the throughput, that improve the quality of the material, NEP goes up, the overall capacity is ramped-up. So there are many factors which are responsible for that. There are more actions in the pipeline in the coming quarters which you will see, given the improved performance from our Silvassa plant.

Pallav Agarwal — Antique Stock — Analyst

Okay. Yeah, thank you, sir.

Sunil Duggal — Whole-time Director & Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Ashish Kejriwal from Nova Wealth [Phonetic]. Please go ahead.

Ashish Kejriwal — — Analyst

Yeah, hi, good evening. Thanks for taking my question. Sir, my question is again on aluminum, because if I’m looking at aluminum, even in the last quarter, when we mentioned the cost reduction in power, we have not seen that kind of cost reduction. And going-forward also, the kind of guidance which we are giving in the cost reduction in power that also does not satisfy the earlier comment also. So, my question is, on account of coal cost when we are talking about that, it has reduced from INR1.9 per GCV to INR1.3 this quarter, we have seen cost reduction of just $170 per ton. So when our captive coal also comes and it’s come to the INR0.516, then how come it comes to be around $325? So, this math, I’m unable to understand. And second question, related to that also, if I’m looking at aluminum different cost of production, like ingot conversion cost, it is shooting up, like $110 to $190. So other costs are still on a rise? And thirdly on premium side also, we are seeing that premiums are also coming down. So is it ingot premium which is coming down or the value addition part which we are [Technical Issues]. These are three elements on the [Technical Issues].

Sunil Duggal — Whole-time Director & Chief Executive Officer

Yeah, yeah. No, thanks for your question and very relevant question also. So first, if I go to — come to the power cost, so power cost last quarter was around $1,000 plus. So this was at an average cost of coal of INR1.7, which we are hoping to fall down to, say, INR1.4 in the current quarter. And if the overall power cost as INR1.70 is, say, $1,000 odd, you can work out your number that if the overall coal cost falls down to INR0.5, INR0.6 or INR0.7, what could be the number for the power cost.

Ashish Kejriwal — — Analyst

Sir, this quarter, you are talking about INR1.73, which is INR1.0 in the quarter or something else?

Sunil Duggal — Whole-time Director & Chief Executive Officer

Yes, yes. The first-quarter, the average coal cost was INR1.9. Quarter two, it was around INR1.7. And in quarter three, we are hoping to, say, around INR1.4 or so.

Ashish Kejriwal — — Analyst

Okay. And what was the reason not achieving our earlier guidance when we were talking about that our power costs will come back to fourth quarter level or something like $800, and which we couldn’t do it in the second? Because in last quarter, you clearly mentioned about this and we are really surprised to see this kind of reduction in power cost.

Sunil Duggal — Whole-time Director & Chief Executive Officer

There are two factors for that. One is that the power demand and the coal stocks at IPPs did not go up and the linkage coal realization was not to the extent we had thought, number one. Number two, even when the linkage coal realization improved from 22% to 55%, we had to move a lot of coal through road, and which actually hit the cost. In real sense, this coal would have come by rig, which was the original allotted means of movement of the coal. This would have reduced the coal cost to a larger extent. But…

Ashish Kejriwal — — Analyst

Okay.

Sunil Duggal — Whole-time Director & Chief Executive Officer

Now, with the pre-captive rigs, which we have mobilized, there is a lot of movement of coal which is taking place to these rigs apart from what is being allotted by the railways. So there is a substantial quantity movement which is happening. But as we speak, there is a — the stocks in IPPs and the linkage allocation has become much higher. So combination of these two things will help us to bring the cost down. Although the third factor, we have not accounted for when I am telling you the cost, the Jamkhani coal block operationalization. So depending on how fast we are able to do the stripping and expose the coal, but if we are able to do that, it will further help us to reduce the cost.

Ashish Kejriwal — — Analyst

Understood. So, sir, just to get clarification, from metalization from 22% to 55%, still because of just movement of railway — less movement of railway, we were able to reduce cost to certain extent. So from second to third quarter, when we are talking about reduction, we are assuming that all 55% linkage or whatever, that will be routed through rail or again, there could be some surprises going forward?

Sunil Duggal — Whole-time Director & Chief Executive Officer

No, not that the total coal will move through rail. A part of it will still move through road. But it will also depend on the rig allotment and the relaxation which will be provided by the railways, but a combination of our own rigs and the railways, we feel that we should we able to reduce our coal cost substantially.

Ashish Kejriwal — — Analyst

Sure, sure. And, sir, next — other questions on premium as well as ingot conversion cost?

Sunil Duggal — Whole-time Director & Chief Executive Officer

Yeah, so the ingot conversion cost, the processing cost, is majorly dependent on the CP Coke and CP Pitch. And as we speak, we have been able to bring down the CP Coke and the CT Pitch prices substantially by 30% or so. This will definitely help us to reduce the processing cost. And on the premium, you know the demand which has eased out in the high premiums geographies and a combination of that we had to tweak the product portfolio along these labs and the value-added product. So, the combination of the easing out of premium in the market in various geographies and the product portfolio, it has actually impacted our NAV.

Ashish Kejriwal — — Analyst

Sure. And sir, lastly on alumina, whether we are producing at a lower cost than a purchased alumina?

Sunil Duggal — Whole-time Director & Chief Executive Officer

So, there was a abrasion in quarter two, which we hope that it is not going to happen in the coming quarter, which normally does not happen. It also depends the imported alumina landed cost also depends on which cycle we are, and through that cycle, the landed cost — I mean, there is a lag between the case and the landed and the usage, so the cost is booked on the usage. So, with that, I think this is not going to happen. There is always a differential between the imported and the logical cost by, say, around $100, $150. So that differential is going to be maintained in the coming quarters also.

Ashish Kejriwal — — Analyst

Sure. Thank you so much. And, sir, eagerly waiting for your cost reductions initiatives to actually reflect in the numbers. Thank you and all the best.

Sunil Duggal — Whole-time Director & Chief Executive Officer

That is our biggest motivation as of now. Thank you, Ashish.

Operator

Thank you. Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to Mr. Sandeep Agrawal for closing comments. Over to you, sir.

Sandeep Agarwal — Head Investor Relations

Thank you, Steven. And thank you all for taking the time out to join us. I hope we were able to answer most of your questions. In case you have further questions, please feel to reach either me or my colleagues at IR team. This concludes today’s call. We look forward to reconnect with you on next quarter earnings call. Thank you, everyone.

Operator

[Operator Closing Remarks]