Vedanta Limited (VEDL) Q4 FY23 Earnings Concall Transcript

Vedanta Limited (NSE:VEDL) Q4 FY23 Earnings Concall dated May. 12, 2023.

Corporate Participants:

Prerna Halwasia — Deputy Head, Investor Relations and Company Secretary

Sunil Duggal — Group Chief Executive Officer

Ajay Agarwal — Interim CFO

Analysts:

Amit Dixit — ICICI Securities — Analyst

Sumangal Nevatia — Kotak Securities — Analyst

Indrajit Agarwal — CLSA — Analyst

Alok Deora — Motilal Oswal — Analyst

Ritesh Shah — Investec Capital — Analyst

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

Rahul Sharma — Analyst

Rahul Jain — Systematix — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Vedanta Limited 4Q FY23 and Full Year 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. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Prerna Halwasia, Deputy Head, Investor Relations, and Company Secretary, Vedanta Limited. Thank you and over to you, Ma’m.

Prerna Halwasia — Deputy Head, Investor Relations and Company Secretary

Thank you. Good evening, everyone, and welcome to our fourth quarter of the financial year ’23 earnings call. I’m Prerna Halwasia, on behalf of the entire team of Vedanta Limited, I would like to thank you all for joining us today to discuss our financial results and business performance. The transcript and audio of this call will be made available on our website. The financial statements, press release and the slide presentation are already published on the website. Today, from our leadership team we have with us Mr. Sandeep Agarwal, Group CEO; Mr Ajay Agarwal, acting as CFO. We also have two leaders from a couple of our key businesses, Mr. Arun Mishra, CEO-Zinc business and Mr. Rahul Sharma, Deputy CEO, Aluminium Business. Please note that today’s entire discussion will be covered by the cautionary statement on slide number 2 of the presentation. We will start with the update on our operational and financial performance and then we will open the floor for the Q&A. Now, I would like to hand over the call to Mr. Duggal.

Sunil Duggal — Group Chief Executive Officer

Thank you, Prerna. Good evening, everyone. And thank you for joining our call today. On the rising interest rates, the Indian economy price driven country followed by strong macroeconomic fundamentals and domestic consumption. Nevertheless, the global economic climate presented macroeconomic hurdles that led to a moderation in commodity prices. Despite this challenging scenario, our team implemented strategies to ensure consistent operational performance and stringent cost control optimizing working capital and ultimately resulting in impressive financial performance.

FY23 was a year of remarkable progress on ESG front led by our transforming for good purpose. We received validation for our progress on ESG from top rating agencies like MSCI, DJSI Sustainability Index which confirms that we are moving in the right direction. We finalized 1826 of RE power agreements and turned four of our businesses quarter positive progressing on our aim of transforming the planet.

Through our CSR initiatives, we were able to positively impact the lives of 44 million people. Our dedication and efforts towards CSR have allowed us to make a significant difference in the communities in which we operate empowering individuals and contributing to the betterment of society. We believe in creating a brighter future by empowering the marginalized communities. Our initiative Project Panchhi is a testament of this philosophy by advocating and enabling 1000 girls from underprivileged rural communities. We aim to bridge the gap of gender inequality and provide them with equal opportunities for growth and success. Our vision goes beyond just diversity as we strive to create a more inclusive workplace that reflects the reach and vibrant diversity of our versatile team.

Vedanta was honored to be highly experienced in Kincentric Best Employer India Award distinguishing us as the sole manufacturing conglomerate in India to achieve this esteemed recognition. Our people are the greatest asset and our strong operational performance is a testament to the same. We delivered highest-ever annual production at Aluminium, Hindustan Zinc, Zinc International and eletrosteel. Commercial production started at Nicomet, India’s only nickel, cobalt operations. Production also commenced from Liberia mines expanding our iron-ore capacity and global footprint.

New 60ktpa furnace was commissioned taking total capacity to 140kpta. We operationalized Koldia [Phonetic] mine and started Jamkhani coal mine. We further added Ghogarpalli and Barra Block to our coal portfolio Ghogarpalli has massive 1.2 billion tonnes of reserves and Barra is unexplored block with 900 million tonne of estimated resources. These mines together would make our expanded operation more than 100% secured of coal. We also declared successful bidders for Sijimali bauxite mine with 311 million tonne reserve. It’s a strategic fit for our size, location and bauxite quality. And is key to strengthening our raw material security. We fully ramp our Barbil ore mines in Odisha [Technical Issues] mine in Goa augmenting our resource base. In line with our steadfast focus on augmenting capacity in vertical integration, we spent around INR10,000 crores on capital projects this year. Our financial delivery is equally noteworthy with all-time high annual revenue of INR1,45,444 crores and second-highest ever annual EBITDA INR35,241 crores. We delivered historic high shareholder return with an interim dividend of INR101.5, per share. And we had a record contribution to the exchequer of nearly INR74,000 crores.

During this year, we made considerable progress on various strategic levers. The Supreme Court permission for care and maintenance of our Tuticorin copper smelter. The matter is now listed for final clearance in August. Signed 10-year production sharing contract extension with Government of India for Rajasthan block. Trade barrier was lifted in Karnataka. Marketing freedom for oil and gas was given.

Now, if I move to our operations, first coming to Aluminium. Aluminium is progressing well on capital projects focused on making our businesses fully integrated with 100% captive alumina from 5 MTPL Lanjigarh refinery and large coal from captive mines. At Zinc India we crossed one million ton milestone production. We aim to continue this positive momentum to reach 1.2 million tonne. Zinc International is well-positioned for the long-term value-creation. Gamsberg produced the highest-ever MIC up towards 258 kpta and project work on next phase is in full swing to take the total capacity to 500kpta.

In oil and gas, the focus this year is going to be on augmenting results and focus to both development projects and exploration. We will undertake high impact exploration program of 10 wells, seismic and study across various basins in Northeast Cambay Rajasthan and offshore targeting addition of 55 million barrels equivalent resources. Iron ore significantly increased its mining portfolios FY23. Total iron ore production in FY24 will be more than 50 million tonnes from Karnataka. We are still proactive in Liberia, Barbil, Orissa and Bicholim mine in Goa go up together. We increased hot metal capacity to 1.7 million tonne and would expand to 3 million tonnes by early FY25. Operation is now fully integrated with Barbil mines to meet ore requirement. Also, we are further planning to add 300kpta capacity for ferro chrome production by FY25 could take the total to 450kpta.

To summarize, we made good progress on our strategic priorities in FY23 and have begun to build on this momentum in the current year. We remain optimistic about the commodities markets and are confident of our ability to navigate the ever-evolving business environment. We look-forward to work together with all the stakeholders and larger communities and thank them for their consistent support. Before we move ahead. I want to take this opportunity to thank Ajay Goel, former acting Group CFO for his unwavering dedication and incredible contribution during his association with Vedanta. I wish him the very best for his future endeavors. I’m pleased to announce that Sonal Shrisvastava will be joining as Group CFO very soon. She has extensive experience working with global organization and large Indian corporates. In her previous goal, she was CFO for Asia Pacific at Holcim. Her expertise in financial services and manufacturing sectors make her an invaluable addition to our leadership team. Taking you through financial performance today, I have with me, Ajay Agarwal who is the interim Group CFO. Over to you, Ajay.

Ajay Agarwal — Interim CFO

Thank you, Mr. Duggal and very good evening to all. I am here to really talk about the quarter 4 FY22, ’23 financial performances. We witnessed the global economy to recover from the lackluster ’22 with a positive bias for economic growth. Despite the global crisis, India’s resilient economy, we believe has shown better performance than the rest of the world, particularly in the manufacturing sector. The RBI expect India’s GDP to grow at the rate of 6.5% in financial year ’22, ’23, ’24, which is certainly reassuring. And we also anticipate that the global commodity demand to perform better than expected due to improving global economic outlook boosted by a revival of Chinese economy, improvement in real-estate market, automobile sector and coupled with the fact that European economy recovery is also quite strong from the impact of inflation.

Speaking of financial year ’22 ’23 despite the macroeconomic challenges, we have delivered our all-time high full year revenue of INR145,404 crores. We delivered second-highest EBITDA of INR35,241 crores in fiscal year ’22, ’23, which helped us to generate record free cash flow pre growth capex of INR28,068 crores. All this is nothing but our enduring — demonstrate our financial success that our underlying fundamental of business remains robust and we have once again achieved year of consistent, dependable and operational performance across our businesses.

Furthermore, this allows us to make a substantial contribution to the exchequer which still is at close to about odd INR74,000 crores during the financial year ended ’23. We also returned a record INR101.5 per share to our shareholders during the fiscal year ’22 ’23. Our continuous focus on operational excellence and cost control measures have enabled us to minimize the impact of inflation which we witnessed during fiscal year ’22 ’23 on our cost structure and also helped us to generate robust cash flows. Combination of these enable us to deliver another impressive quarter performance and some of the key financial highlights for the quarter ended 31st March ’23. Our consolidated revenue stands at INR37,225 crores. On a quarter-on-quarter basis, this is up by 10%, and largely it is driven due to higher sales volume and improved LME. We also delivered an EBITDA of INR9,362 crores which is 32% higher than quarter-on-quarter with a strong margin of 29% supported by easing of input commodity inflation, volume growth and various cost-saving initiatives the Group undertook during the last quarter.

Our profit-after-tax stood at INR3,132 crores which increased marginally quarter-on-quarter. And we continue to maintain a strong double-digit return on capital employed to the tune of 21% throughout the year. We have our Income statement in appendix, which is page number 27, where you will find details against each head of the profit and loss account. If we move to the EBITDA bridge, slide number 21, when comparing the EBITDA performance quarter-on-quarter, the largest driver was the lowest input commodity costs and improved LME.

Beyond these external factors, we are pleased that we have delivered higher volume through improved operational efficiencies, further supported by initiatives on cost and marketing efforts. Our key businesses, mainly zinc and aluminium, achieved record operational performances and lower cost of production. Besides business performances as the result of several improvement initiatives undertaken across various businesses which the Group has. On a full-year basis, our EBITDA was down due to lower LME and higher input commodity cost, which was partly offset through increased volume, strategic hedging initiatives and forex gain.

Moving to slide number 22 on net debt bridge. During Q4 FY23, our net-debt as on 31st March stands at INR45,260 crores. In the quarter, our business demonstrated the robustness of our performance by generating a healthy operational free cash flow, pre growth capex of approximately INR7,211 crores which is 11% higher quarter-on-quarter. The net debt increased overall due to the allocation of funds towards capital expenditure. And a significant amount of. shareholders’ return, which is all-time high for the Group.

We’ll move on to the balance sheet now, page number 23. We remain committed to our capital allocation framework. Which encompasses robust balance sheet of healthy payout ratio with solid dividend yield and flexibility for investing in discretionary capital options including organic and inorganic opportunity, as well as providing additional shareholders’ return. Our net debt to EBITDA stands at 1.3x and it is maintained at comfortable level. We ended the quarter with INR20,922 crores on healthy cash-and-cash equivalents. Our average debt maturity continues to be maintained at 3.5 years with average cost of borrowing at 7.8%. I also would like to mention that our HoldCo has also made considerable progress towards its commitment to reduce debt by INR4 billion over the course of three years. They have already delivered INR3 billion till date out of which INR2 billion was achieved during the fiscal year ’22, ’23 itself.

With our strong and flexible balance sheet, we are well-positioned to continued disciplined investments in our pipeline for various value-added growths. In fiscal year ’23, we invested approximately INR1.2 billion in growth-oriented capital expenditure which brought several projects close to completion. As a result, we are now comitted to allocate INR1.7 billion towards growth capex in the current fiscal year. We have maintained our commitment of providing our stakeholders with strong and consistent performance and attractive return even in the face of volatile macro environment. Despite the challenges we have demonstrated resilient throughout the year, the progress we’ve made in the past year is quite noteworthy and I have full confidence in our ability to execute our business strategy effectively as well as the finance strategy effectively which will position us to create value, not only now, but also in the foreseeable future.

I’ll hand it over now to Prerna.

Sunil Duggal — Group Chief Executive Officer

Operator, hand it over to you for questions and answers.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen. we will wait for a moment while the question queue assembles. [Operator Instructions] The first question is from the line of Amit Dixit from ICICI Securities. Please go ahead.

Amit Dixit — ICICI Securities — Analyst

Yeah, hi. Good evening, everyone. And for the EBITDA–

Operator

Mr. Dixit, the audio is not clear from your line. Please use the handset.

Amit Dixit — ICICI Securities — Analyst

Is it better?

Operator

Yes sir, thank you.

Amit Dixit — ICICI Securities — Analyst

Yeah, so good evening, everyone. Thanks for the opportunity and congratulations for a good set of numbers and very healthy dividend yield this year. So, I have two questions. The first one is pertaining to oil and gas division. Now if you look at the, I mean, production, it has been declining particularly and the guidance that we have for FY24, I know we are targeting. you know, augmenting reserves and resources but still the guidance is quite low at 130. Now, in our annual report and Investment Day we had highlighted that we will reach a much higher production level by FY25. So are you shifting that particular production level to, I mean, further or is it that that particular level is still intact.

Sunil Duggal — Group Chief Executive Officer

Yeah, so I will go for this question. So we have given a guidance of 135 to 140ktpa. This time, we are a bit mindful of giving the guidance because we want to give the guidance and want to beat the guidance unlike earlier years. It shows, which we are trying to address and the initiatives which are in pipeline is to manage the decline, number one. Number two, there are two three high profile projects which are in the pipeline. We are in the process of materializing that.. One is the enhanced oil recovery. So the government is coming up with the Group policy on the enhanced oil recovery. And with the government that our license is valid up to 2030 and the results and the outcome from the existing results can go beyond 2030. So, the government coming up with the new policy of the enhanced incentives and also considering if the contract could be extended beyond 2030. So, this is one initiative. The other two, three new initiative have been the exploration wells around our operations, especially in the offshore where we feel that the result would come and you probably must have noticed that we have a new CEO in the name of Nick Walker, who have a very rich global Experience. So, he is in the process of evaluating the various opportunities. But apart from that, he has identified 10 high-impact wells across offshore North East KG basin and he particularly believes that the potential in North East on the border of Assam and Nagaland is very high. Where some disputed area was there. The government has resolved this issue and we want to start the seismic and the drilling at this operation as soon as possible. He believes that the potential of this area could be as big as it was in the Rajasthan block. So this is what we feel we are doing in oil and gas. But our belief is very firm and his belief is very firm that we will get some good discovery from the exploration wells and the couple of projects which I named. When we will put the this project in the pipeline, it will give us the step jump, if not in the current year where we want to beat our guidance, but in the next two years, it will give us the step jump from where we are.

Amit Dixit — ICICI Securities — Analyst

Got it. Sir, just a follow-up on this. What would be your guidance, let is say in FY25. I mean–

Sunil Duggal — Group Chief Executive Officer

We are evaluating that. I don’t want to put my words into the mix mode. We will be evaluating that, probably in the next quarter, we may be able to give you a better guidance of what he believes could be the potential in the year FY25 and FY26 depending on how many projects he is able to conceptualize, and of course, as the year progresses, the 10 high potential exploration wells, so this gives some results, then the visibility could be even better. And then we can report back, what could be the full potential which we can explore in the year FY25 and FY26.

Amit Dixit — ICICI Securities — Analyst

Sir, the second question is on ferro-chrome. We are targeting 450ktpa of capacity. This is a very huge capacity. I mean I don’t think at South Africa, anybody has the kind of capacity in the world. So first of all, where we are getting chrome ore for it from and ferro chrome being up very high, very power intensive business, won’t it impact your ESG aspiration and what markets are we targeting for this. Is it export or domestic. What could be the mix of this particular offtake?

Sunil Duggal — Group Chief Executive Officer

I think you have asked 4, 5 questions in one question. I’ll try to answer all those questions. So for this business, the capacity was 75ktpa. And there was one unfinished furnace which we were since since commissioned, this was 60ktpa furnace. So now the overall capacity has debottlenecking and the commissioning of new commitments taken to 40ktpa. This is up and running. There are two mines. We were taking the AC for this mine to — AC capacity from 50ktpa to 150ktpa. There is another mine, Ostapal mine. This mine has been running as an open pit mine. We want to take it underground and no better experience than Vedanta and Hindustan Zinc to transition from open pit to underground mine. There is a rich resource mine at depth under this open pit. So we want to develop this open pit. We are about to start the portal and take the Board approval. This in the first phase, we want to take this mine to 1.5 million tonne. And in the second phase, we want to take this mine to 2.5 million tonne. In the first phase, we will add the furnace of 150ktpa taking the total capacity to say around 300ktpa. And then the second phase another furnace we want to install of 150ktpa taking the total capacity to 450ktpa. So as far as carbon footprint is concerned, I mean, we have to go hand in hand in parallel to evaluate the possibility of decarbonizing our assets and you must have seen the aggressive way we have gone, and today the work is on to install 4 gigawatts of renewable power and which will give 33% reduction of the carbon footprint from our promise of 25% by 2020. And we want to put a plan in place by FY25 to have a full visibility of 25% carbon footprint by December 2030. So we are fully committed, we want to do it even before FY2030. That is what the internal motivation is and we are fully committed to fully decarbonize our operation by 2050.

Amit Dixit — ICICI Securities — Analyst

Okay, great sir, and all the best.

Operator

Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.

Sumangal Nevatia — Kotak Securities — Analyst

Yeah, good evening and thank you for this opportunity. Just continuing on Amit’s question, I mean, on the delays. I mean we’ve seen across businesses, there are delays in projects. Aluminium business, for example, the one million tonne expansion, earlier, we were guiding 1Q ’24 now we moved to 1Q ’25. And we are seeing the same in coal mines and electrosteel as well. So just sir, if you could just highlight. I mean over the next two-three years, the key projects and what are the reasons for these execution delays that we are facing.

Sunil Duggal — Group Chief Executive Officer

So I would say there are not delays as such in the execution of the project. I mean, some of the factors which also play a bit of the part is that we — some of the technology and it depends, also come from China. A bit of the delay happened but broadly all our projects are on schedule. The high profile project where the maximum returns we expect and we want to integrate our operations is Aluminium business where we are commissioning the Train one and Train two both this year. And operationalization of the coal mines, I would say we may have a record in the country where in such a short span of time, we have been able to operationalize Jamkhani mine and it is up and running today. The license capacity of 2.6 million tonne, now we have taken the approval to raise the capacity to 3.9 million tonne. In the current year, we will make a full production of 3.9 million tonne. One of the other mine, Kurloi mine, we want to operationalize this year itself. So operationalizing the mines after winning it through auction in a period of one to two years. I don’t think there are many people who are able to do it. Even next year, we want to operationalize Radhikapur and Ghogharpalli mine. So, all these mine operationalizing, this will provide more than 100% security and same way we want to go for Sijimali mine which we have won through auction for bauxite and because this will provide a full bauxite security to us. The R&R is such that when the mine could be fully ramped up more than 300 billion tons of ore and resources, this mine has the potential to produce 12 to 15 million tonnes of bauxite, which will provide a full security to us. And we want to go this way and integrate operation. On the value-added product, this is a very important area where we are commissioning the whole product, which is the highest demand growth market in India, and the premiums are very-very high. Similarly in the billet capacity, PFA capacity. So we want to make operations 100% of value-added products. So similarly, there are projects going on in the other businesses like electrosteel, Zinc International, oil and gas. So we feel that broadly we are on track to complete our projects in time.

Sumangal Nevatia — Kotak Securities — Analyst

So just I mean repeat and get some specifics, this BALCO one million tonne expansion, this is almost a one year delay from what we said last year. So can you share some details as to what is the status, what is causing the delay. And the same with Electrosteel, 1.5 to 3 million tonne expansion, similar one, one and half year delay. So just some specifics on these two projects.

Sunil Duggal — Group Chief Executive Officer

This is as I said that the hiccup [Phonetic] movement from China caused bit of delay but more or less these projects are in full swing now and whatever commitment now we have given, we will be able to complete the project on those timelines.

Sumangal Nevatia — Kotak Securities — Analyst

Okay, got it. My second question is with respect to our capital structure and also pledging. I mean, we’ve seen that, we read in the news that we are pledging Hindustan Zinc shares for incremental loan despite having such a strong balance sheet and we just want to understand, I mean, what are the reasons. Is it because for higher dividends we are raising these loans or because. I mean, the leverage, the lenders are not comfortable lending to us without these pledges. And also in the medium-term, what should we expect the capital structure of Hindustan Zinc be, I mean in terms of debt and payouts.

Sunil Duggal — Group Chief Executive Officer

From a capital structure of Hindustan Zinc perspective, maybe when you have the Hindustan Zinc both meeting and the investor call probably that will be right for you to ask that question. Speaking from the Vedanta standpoint, pledging Hindustan Zinc shares and raising funds, these are, in our view, these are natural course of business. Business, the usual way of sourcing and raising debt. We don’t that to be extraordinary event which will require a significant different response to this question.

Sumangal Nevatia — Kotak Securities — Analyst

Got it, thank you and all the best sir.

Operator

Thank you. The next question is Indrajit Agarwal from CLSA. Please go ahead.

Indrajit Agarwal — CLSA — Analyst

Hi, good evening. Thank you for the opportunity. I have two questions. My first question is, can you help us understand how much is the repayment view at the parent VRL till June and for the next 12 months.

Sunil Duggal — Group Chief Executive Officer

Till June, the payment due is about odd $750 million. I maybe, the numbers might obviously be correct but we are about odd $750 million and for the year — the balance of fiscal year, the amount could be around $2 billion, which includes the 750. So what’s the part of the question, Indrajit?

Indrajit Agarwal — CLSA — Analyst

My next part, actually a follow-up to that is, what is the kind of sourcing we are looking for till June for the $750 million.

Sunil Duggal — Group Chief Executive Officer

Well, I can assure you that the Group has always met its commitment on time. And Group is working towards to meet its commitment. So whatever the timelines as you said for the June month, for the June quarter, we are working towards it to meet its commitment and likewise it will be done for the year end as well.

Indrajit Agarwal — CLSA — Analyst

Sure, thank you. And what is the status on the GI to RE conversion. Where is it stuck and what is kind of timeline you should look at.

Sunil Duggal — Group Chief Executive Officer

So we are reaching out to all the lenders to seek their NOC. As you know, this process requires the NOC from the lenders. And the work is ongoing as we speak. The scheme does envisage any outflow of cash and hence there is a lot of impact on the creditors of the company. So as and when we get the NOC from the lenders, it should happen.

Indrajit Agarwal — CLSA — Analyst

So getting this NOC is it more procedural or is there any kind of push-back or any questions by the lenders that we need to address before we get the NOC.

Sunil Duggal — Group Chief Executive Officer

We are reaching out to the lenders. And like I said, as we speak, we are talking to them, we want to understand if there are any concern. In our view it is a process. It does not envisage any challenging. So as and when we get the NOC from the lenders, it will be done.

Indrajit Agarwal — CLSA — Analyst

Any timeline for that, that you can give at this point.

Sunil Duggal — Group Chief Executive Officer

At this point, it is difficult to give any timelines. But what I can assure you is that the conversations are on, discussions are on with most of them and we are hoping that it should get solved.

Indrajit Agarwal — CLSA — Analyst

Sure, thank you. I have more questions, I’ll join back in the queue.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Alok Deora from Motilal Oswal. Please go ahead.

Alok Deora — Motilal Oswal — Analyst

Hi, good evening. Just if you could, in your comment, you mentioned about some slowdown in China and Europe. So just if you would indicate what exactly, how are you seeing the demand situation there. And what is the outlook because some are getting mixed signals in some of these geographies on the demand side.

Sunil Duggal — Group Chief Executive Officer

Yeah. There is slowdown in China and Europe. That was known to cause delay in the system equipment, some of that is from China. So that was what it is. As far as you the slowdown in China and Europe is concerned and the commodities and the metals, we feel that the metals we deal, there is an upsurge in demand in India which gives us the opportunity to have upside in demand. But these metals we deal has to play a very pivotal and critical role in decarbonization. So, the resources today and globally are such that It will be not easy to meet the growth in the demand in this sector. So we feel that this sector will always remain as a standard sector. And the commodity prices however are going to stay at elevated level probably metal will be a bit. So we are very bullish. We are very confident that we have to play a very critical role to meet the demand of these metal, both in India and globally.

Alok Deora — Motilal Oswal — Analyst

Sure, just one last question. The purchase by Hindustan Zinc of Zinc International, what is the status on that because what we understand is that the timeline for sale of approval is lapsed. So any update on that because, what is the status of this $2.9 billion stake.

Sunil Duggal — Group Chief Executive Officer

There is no update as such to be reported at this point of time. I mean we still believe that this is value accretive to both Hindustan Zinc and Zinc International, because these two operations will definitely complement each other because Zinc International has a very rich reserve and resource base which is even more than Hindustan Zinc. the way Hindustan Zinc has grown from where it was to what it is today. Zinc International, of course, has also grown, but there is a huge potential. So what Zinc International possesses and what it has reflected and still it has and management style, which Hindustan Zinc has, we feel that these two businesses coming together can create a wonder. And this is what we have been communicating to all our stakeholders.

Alok Deora — Motilal Oswal — Analyst

Sure, no, I understand. So the reason. I was saying is because there were reports that, so Hindustan Zinc had around three months to call for EPM for this and that 2 or 3 months lapsed kind of last week. So that’s why I was just checking on the data.

Sunil Duggal — Group Chief Executive Officer

No, we will remain in active discussion with the stakeholders to find out that what possibility in what manner could we make the non-cash deal or what could be the other ways where this alignment could be possible. And we still feel that this is a very-very value attractive opportunity for both the businesses.

Alok Deora — Motilal Oswal — Analyst

Sure sir, That’s all from my side. Thank you and all the best.

Operator

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

Ritesh Shah — Investec Capital — Analyst

Yeah, hi sir, thanks for the opportunity, sir. I have two buckets of questions. First bucket has four sub-parts in it. Before I start, I’d like to congratulate the team on debt reduction at VRL to $6.8 billion. Sir, first question has four parts to it. First is. I think we had indicated $2.1 billion of repayment, which was there from Jan to June. In the earlier call, we had indicated, we were looking at $550 million from PSU banks, $150 from Barclays, $750 from Oaktree, $300 million for [Indecipherable] and there was a balance small amount which was left. So the question is, sir, how much have we tapped. And what’s the status on that. That’s the first question. Should I compete like the bucket of questions, four questions.

Ajay Agarwal — Interim CFO

Yeah, please go ahead.

Ritesh Shah — Investec Capital — Analyst

The second related part over here. Part B is I think there was, the rating agencies were talking about a one billion dollar of investment at Zinc International. So just wanted to know your thoughts whether it has happened, not happening, is there some probability to the event. That’s the second thing. Third is, if you could please clarify what is the exact pledge and encumbrance number at both Vedanta and Hindustan Zinc and I do have taken note that the promoter holding in Vedanta has reduced from 69.76 to 68.1, so how should we read this. This is pledge and encumbrances. And last question, for the first part is, what is the retained earnings number on a margin basis for Vedanta India.

Ajay Agarwal — Interim CFO

Okay, so let me make an attempt to answer your question. Rating agencies have quoted loan transaction at Zinc International. I think in the previous question this question was somewhat answered. These are again a very-very specific transaction and routine financing arrangements, which the Group undertakes on a year-on year basis. And as and when the transaction gets consummated, we will be able to respond to a very specific question of yours. Coming to the repayment, like I said, the Group is extremely confident to meet its debt obligations, commitments and requirements on a timely basis. We have always met our commitments in the past and I don’t see any reason, any risk of not meeting the commitments in the future as well. So I may not have full details because it’s a Investor Call of Vedanta Limited and not necessarily VRL. But I’m sure that the team is working and we have full details in terms of making plans to make this arrangement, whatever the commitment are due from here until March. Coming to be retained earning numbers, as on 31st March 2023, we have INR3,843 crores as our retained earnings in the bank balance sheet. I hope, Ritesh, I have been able to answer all your questions.

Ritesh Shah — Investec Capital — Analyst

Sir, on the promoter stake, which has reduced and on the pledge and encumbrances that Vedanta, Hindustan Zinc level how should we look at this?

Ajay Agarwal — Interim CFO

Yes, in our view it’s a independent transaction done by the promoter entity and we are not in a place to really speculate the reduction and where the funds have been used by the promoter entity, Ritesh.

Ritesh Shah — Investec Capital — Analyst

Right. And, sir, on pledges and encumbrance.

Ajay Agarwal — Interim CFO

Pledge part of it, I believe from a Hindustan Zinc perspective, we have pledged 9.21% share of Hindustan Zinc and the — we have signed 50.1% as NDU. So these are the details with respect to Hindustan Zinc pledge.

Ritesh Shah — Investec Capital — Analyst

And, sir, for Vedanta.

Ajay Agarwal — Interim CFO

Vendanta, you mean to say, VRL.

Ritesh Shah — Investec Capital — Analyst

Vendanta India, sir. What quantum of equity is actually pledged or encumbered.

Ajay Agarwal — Interim CFO

Like I said, Vedanta Limited had pledged 9.2% and signed an NDU of 50.1% of Hindustan Zinc.

Ritesh Shah — Investec Capital — Analyst

Sir, so okay, so let me rephrase that. From Vedanta Resources into Vedanta that 70% stake, which has reduced to 68.1%, what is the status of that 68.1%, what part of it is pledged or encumbered?

Ajay Agarwal — Interim CFO

It’s hopefully encumbered. And it is kind of an NDU, which we — which I just explained to from Hindustan Zinc point of view. It’s a similar arrangement.

Ritesh Shah — Investec Capital — Analyst

Okay Sir, sorry, if I’m just running about. But if the status is fully encumbered, then how is that that the promoter is allowed to reduce its stake because a little bit of technicality, what I understand is if it is encumbered, the entity would not have the right to actually sell it.

Ajay Agarwal — Interim CFO

Well, I can’t really speculate how they were able to sell, but I am sure as we know that in the last year they have reduced the debt also. I’m sure that some part would have been unencumbered and would have allowed the free share to trade.

Ritesh Shah — Investec Capital — Analyst

Sure, sir. I just have one question for Duggal, sir, and probably, I’ll join back the queue. Sir, any update on the semiconductor foray whether it is at Vedanta level or VRL level. Any color over there. Thank you so much.

Sunil Duggal — Group Chief Executive Officer

Just now the semiconductor is not under the banner of Vedanta Limited. So it will not be possible for me to make any comment in this point of time

Ritesh Shah — Investec Capital — Analyst

Sure, sir. That’s very helpful, sir. I’ll join back the queue. Thank you so much.

Sunil Duggal — Group Chief Executive Officer

Thank you very much and thanks.

Operator

Thank you. The next question is from the line of Ashish Kejriwal from Nuvama Institutional Equities. Please go ahead.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

Yes, hi, good evening, everyone. Sir, my question is on aluminum business. You know is it possible to share what kind of materialization of linkage coal happened this quarter and how you are expecting your cost of aluminium to fall in next quarter.

Sunil Duggal — Group Chief Executive Officer

So. I have with my colleague. Rahul Sharma, on the call, but I’ll give you a gigger perspective of the coal linkage. The coal linkage has improved because the coal position in India has eased out and you must have also seen that the coal stocks in India in IPPs are about 15 days compared to 6, 7 days, so last year at this point of time. So with this, the premiums are, the early option premiums are down — better the coal production has gone up from Coal India. The last year, the production growth in Coal India was 12%. Captive mines coal production went up by 25%. Overall the production grew in India by 15%. So the power demand is not rising at this stage and because of the renewable capacity is also getting commissioned. On the overall pie, the renewable, the contribution of the renewables in the power, making the power demand is also going up. So this is all easing out the stress on the coal availability in India and with this, we feel that from now on the provision which is more and more and similarly the rates availability from there also is becoming better and better, but exactly on the aluminium cost, Rahul, if you are there, kindly make your comments on what the cost is exactly in the topic and what do you feel is it going forward.

Rahul Sharma — Analyst

Yes, thanks so much, sir Duggal. I think the important part is that, if you see from my where coal is now, which I will talk linkage and captive because now we have opened up the Jamkhani mine in last quarter. So will club both. And what I’m trying to make it point is that if we see that in Q4, we were at a 66% of linkage plus captive and metallization was peak 82%. But the good deal is that this year we are starting with 80% of security and target remains more than 90% of metallization. So from a coal security and metallization, I think we are at much better position. That is point number one. The second important point, which I am very pleased to know that if you remember the last year when we started the year, our coal inventory was four to five days before the monsoon, but this year when we are starting the year, we have in our plant close to 14 days of inventory and another 11 days at our captive mines. So totally, we have 20 to 45 days of inventory, which we are very comfortable before monsoon on the Q1. And coming to the point in terms of the cost from the Q1 point of view, I think for a year guidance has already been given in our presentation but our target for this what we said last quarter was in Q4, we are absolutely there is around 4% reduction and same way we are looking 5% to 6% reduction in Q1. So, from the cost side. I hope I have answered your question.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

Yeah, that’s very clear, sir. Second thing is because in earlier calls, we have indicated estimated coal cost of different mines at peak capacity. Is it possible to share that like Jamkhani, Kurloi, Radhikapur, I’m just trying to compare it from the existing cost where we can have going forward.

Ajay Agarwal — Interim CFO

I can only answer that you can if see the coal bucket, as Mr. Duggal said initially, the coal mine we have more than more than 100% of amount of captive requirement, the capacity is there and overall cost we estimated it will be less than 70%. It can be between 65 to 70 that is the projection for that. We are absolutely on that point.

Sunil Duggal — Group Chief Executive Officer

Which works out to say a certain power cost and depreciate $50 per ton.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

Sure, sure, and sir, secondly have we done any further hedging in our — any of the businesses.

Sunil Duggal — Group Chief Executive Officer

Not at this point of time.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

Sure, thank you and all the best.

Operator

Thank you. Ladies and gentlemen, we will take the last question from the line of Rahul Jain from Systematix. Please go ahead.

Rahul Jain — Systematix — Analyst

Yeah sir, thanks for the opportunity to ask the question. Sir, on the cost side, I think guidance appears very conservative because given the coal price in Richards Bay is flat 70% and now we are using so much coal across our businesses, I believe more than 35 million ton–

Operator

The audio is slightly muffled from your line. Please use the handset.

Rahul Jain — Systematix — Analyst

One second. Sir, you gave an elaborate answer, but your guidance appears to be very muted in terms of the cost inflation that we have seen. If I’m not mistaken Richards Bay is down 70% from its peak and we should see a much better delivery from Coal India. So are we conservative on our numbers on the — both on the Hindustan Zinc as well the Aluminium business because you have just given I think $200 kind of a cost reduction, whereas in the past, we have reached about $1400, $1500 for aluminium. So are we being very conservative on this.

Sunil Duggal — Group Chief Executive Officer

No. I think, you will get me right. Because we would like to definitely beat the guidance of what we have given in this call today. We have given a guidance of $1,800 to $1900 on our hot [Phonetic] metal. So I think we are able to meet around $1,800 per ton of cost in this year. So let us suppose even if aluminum prices stay at 2 between $2,300 to $2,400 so and NSR of say $2,600 and the cost is at $1,800 so it will give us a very good EBITDA margin of say around $600, $700. So which is good for the business, but we wish to and we aspire to beat the target. So, but the overall objective of the business of having a EBITDA margin of $600 per ton is met at this cost even at these aluminium prices of say average of 2,300 or 2,400.

Rahul Jain — Systematix — Analyst

Right. And sir, also we stepped up the capex guidance across all the businesses. I think is the highest capex that we’re going to do in the last five years. So in terms of, say, if there is some commodity price crunch or there is some weakness in price which persist, so which are the key priority, so which are the ones which we are going to pursue, no matter what. I mean, which are the top projects that we are looking at in the next two years.

Sunil Duggal — Group Chief Executive Officer

So basically, all these are very very important. The major capex spending of $0.7 billion is in aluminium. This is on the vertical integration adding the value of the buyback, operationalization of mines and these capex are going to make us smarter and smarter. Every capex commissioned is going to add dollars to the bottom line. So these capex are very-very important as well as aluminium business is concerned. Similarly, the other capex if there are, the opportunity to debottleneck the low-hanging fruit in Hindustan Zinc to take the full capacity to 1.2 million tonne. We are very excited about this capex. Similarly. in electrosteel, it is unfinished project. We want to complete this project as soon as possible. Similarly in Zinc International, the way the zinc business is and the the way the projection of the zinc commodity prices are there, still we want to complete this project as soon as possible. So all these projects are very-very value accretive to us and we are very excited and we want to finish these projects as soon as possible because all these projects are going to increase our revenues comparing the cost and make our position much much more fundamentally more stronger. So we are very excited and these are the project where, these are all brownfield expansions.

Rahul Jain — Systematix — Analyst

Right, right. So that was very elaborate answer. Sir, just a related one. So should we expect the dividend payouts to kind of that we have been very generous in dividend last one, one and two years. Should we expect now to be more moderate in line with your earnings or how should we see the dividend in the next coming years.

Ajay Agarwal — Interim CFO

So Rahul, I think, you know. I answered this question. Ritesh also asked the same question. Dividend is a Board matter and I’m sure Board will consider all parameters. That really ensuring that the shareholders are rewarded.

Rahul Jain — Systematix — Analyst

No, I mean, it was — because our capex is going up significantly, so obviously cash allocation for better frame. So that is coming more from that side. Anyway, thank you so much.

Operator

Thank you. Ladies and gentlemen, I now hand the conference over to Ms. Prerna Halwasia for closing comments.

Prerna Halwasia — Deputy Head, Investor Relations and Company Secretary

Thank you, Prashant, and thank you all for taking the time to join us. I hope we were able to answer most of your questions. In case you have any further questions, please feel free to reach me or my colleagues at the IR team. This concludes the today’s call. We look forward to reconnecting with you for our next quarter earnings call. Thank you everyone. Have a good day.

Operator

[Operator Closing Remarks]