Vedanta Aluminium Metal Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

11 Ajay Goel, Anup Agarwal, Arpit Mundra, Arun Misra, Charanjit Singh, Jim Johnny Gast, Navin Jaju, Pankaj Jha, Pankaj Kumar Sharma, Rajender Singh Ahuja, Rajesh Kumar

Analysts

12 Abhishek Poddar, Akhilesh Kumar, Amit Murarka, Ashish Kejriwal, Indrajit Agarwal, Jashandeep Singh Chadha, Pinakin Parekh, Raashi Chopra, Ritesh Shah, Sabri Hazarika, Shubham Jain, Sumangal Nevatia

Financials & KPIs

Geographic & Segment Commentary

Vedanta Aluminium (VAML): Record quarter with aluminium production 632 kt (+5% YoY) and VAP output at all-time high 389 kt (+14% YoY), reflecting continued shift toward 90% VAP share goal. Alumina production drove 41% YoY growth to 826 kt (QoQ -6% due to Langigarh power plant stabilisation and red mud filtration issues). Hot metal cost declined 4% YoY to $1,698/ton with captive alumina mix at 70-72%. Kurloy mine received mining lease and permission, targeting 2 Mt in FY27 and 8 Mt in FY28. BALCO pot line 3 ramp-up progressing; 24 kt produced in Q1 from the new line, targeting 260-270 kt this year and full 435 kt next year. H1 will see higher costs due to monsoon power plant shutdowns; H2 volume accretion expected.

Vedanta Limited: Demerged entity (Zinc India, Zinc International, Copper, Ferrochrome) delivered ₹8,469 crore EBITDA and ₹5,294 crore PAT in maiden quarter. Zinc India refined metal output 260 kt (+4% YoY) at record-low cost of $851/ton; silver contributed 46% of EBIT. Gamsberg Phase 2 (+200 kt) commencing operations in August; Phase 1 production up 10% QoQ to 45 kt at $1,549/ton cost (+7% QoQ improvement). Copper India sales 53 kt (+3% YoY), highest Q1 in eight years. Copper International (Middle East) rod sales down 51% YoY due to geopolitical supply chain disruption. Ferrochrome achieved highest-ever quarterly EBITDA of ₹101 crore with Tracker ore production up 41% YoY to 153 kt.

Vedanta Power: Demerged effective May 1, 2026; India's 5th largest private thermal player at 4.2 GW. Sales up 38% YoY to 5,224 million units; 74% of volume secured via medium/long-term PPAs; 85% coal backed by long-term linkage. Meenakshi achieved highest-ever EBITDA (₹112 crore) and sales (~1,350 million units), with Indian coal replacing imports (65-70% local, plan to reach 100%). Import coal prices up >60% YoY but contained coal cost to +12%. JUHI plant availability improved to 86%; biomass co-firing at 7.9% (highest in region). Sakti Unit 1 boiler incident: unit restoration 26% complete, restart by end Q2 FY27; Unit 2 on track for Q4 FY27; insured for losses. Regulatory wins: ₹300 crore potential refund (supply shortfall) and ~₹40 crore annual ash cost recovery.

Vedanta Iron & Steel (VISL): Fully integrated model (mining in Odisha, Goa, Karnataka, Liberia; steel in Goa and Bokaro). Revenue ₹3,662 crore (+18% YoY), EBITDA margin expanded from 11% to 14%. Salesable production at 582 kt; iron ore production 2.6 Mt (+4% YoY) with 24% EBITDA margin improvement on better realisations and cost efficiencies. QoQ margins moderated by higher discounts on low-grade ore and elevated ocean freight. Bokaro expansion got Stage 1 forest clearance, on track for completion by FY27 end; ductile iron pipe project in Goa expected later in FY27.

Vedanta Oil & Gas: Production steady at 77.7k boepd (working interest 51.1k boepd) with well productivity improvement programmes and targeted well interventions. Unit operating cost down 3% QoQ to $17.4/barrel; FY27 costs expected aligned with FY26 levels. EBITDA margin 49% (+16% QoQ on Brent prices up ~50% QoQ). Rated AA stable (CRISIL & ICRA). Production below QoQ due to natural decline; sales pattern with ~85% sold volume will liquidate post-monsoon.

Vedanta Resources (VRL): Debt down to $5 billion (from $10 billion over 3 years); target $3 billion. Sold 1.7% stake in Vedanta Ltd ($200 million) during the quarter. Executing $5 billion refinancing programme: raised $1.7 billion international bonds at 7.4% average coupon (8.5-year maturity) and tied up $2.25 billion syndicated term loan at 6.4% (3-year maturity) — targeting ~280 bps reduction in funding cost and >₹1,000 crore annual interest savings. All three rating agencies upgraded VRL to BB/BB equivalent, decade-high.

Company-Specific & Strategic Commentary

Demerger Success & Value Unlocking: Combined market cap of resulting companies grew over ₹71,000 crore in Q1 FY27 alone. Demerger effective May 1, 2026; VAML declared first-ever dividend (₹8/share); all entities rated AA or better. Real estate value unlock: ~2,000+ acres of land held across the group; business not required for operations to be demerged into a pure-play company, targeting ~₹30,000 crore value (aspirational, process ~9-12 months via NCLT).

VAML Cost Roadmap: Management guided $175-200/ton cost reduction over next 3-4 quarters from current $1,698. Drivers: Lanjigarh captive alumina ramp-up to ~90% (from 70-72%), CGMALAI captive bauxite (savings of $40-50/ton), Ghogarpalli coal benefits. ~70% of savings from alumina+bauxite, balance from coal. FY27 capex ~₹5,000 crore growth + ₹2,000 crore maintenance; next year ₹3,500-4,000 crore.

Capital Allocation Policy Shift: Post-demerger, all five boards have moved from prescriptive to descriptive dividend policies — boards have flexibility based on capex needs and clawback. Group target: 4-5% dividend yield on each company's market capitalisation; at current market cap this implies ~$1.5-2 billion annual payout across entities. No intercompany loans among entities; only routine RPTs with full governance compliance. Brand fee to VRL: ~3% across most businesses (0.75% for power and copper), locked till March 2029.

Growth Pipeline: Group capex ~₹20,000 crore in FY27 across five entities; growth and deleveraging to coexist given >50% EBITDA-to-cash conversion. Key projects: Gamsberg Phase 2 (Aug), Balco ramp-up (260-270 kt FY27), Kurloy coal mine (2 Mt FY27 / 8 Mt FY28), CGMALAI bauxite (1-2 Mt FY27 / 6-7 Mt FY28), Sakti Unit 1 & 2 restoration, Bokaro expansion, Zinc fertilizer plant and hot acid leaching commissioning.

Hedging: For the balance of FY27, VAML is hedged 28% of volumes at average $3,062/ton; Q2 hedged 270 kt at $2,830; Q1 hedged 293 kt at $2,813.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

VAML EBITDA Reconciliation & Sales Volume

• Question: Reported EBITDA (₹10,499 crore) differs from sum of Jharsuguda and BALCO EBITDA (₹10,527 crore). What explains the gap? Also, no sales volume was disclosed this quarter - can you provide? (Akhilesh Kumar, MK Global)
• Answer: Difference is intercompany eliminations on transactions between BALCO and VAML — a small adjustment. Sales for the quarter: 615 kt. (Anup Agarwal, CFO VAML)

Alumina Production Trajectory & Cost Outlook

• Question: Alumina run-rate is ~1.1 Mt/quarter, but full-year target is 4.1 Mt. How do you achieve this, and will Q2 alumina costs decline? (Indrajit Agarwal, CLSA)
• Answer: Monsoon months are typically difficult for power assets and alumina production, so H2 is volume-heavy — consistent with last year's trend. Full-year target of 4-4.1 Mt remains intact. Alumina cost was $780/ton in Q1; guidance for Q2 is ~$750 as API falls and captive mix increases from 70-72%. Further reduction toward $700 depends on Lanjigarh ramp-up and captive bauxite (CGMALAI) entering the mix. Q1 hedging: 293 kt at $2,813. (Rajesh Kumar, CEO VAML; Anup Agarwal, CFO VAML)

Dividend & Capital Allocation

• Question: With high capex across the demerged entities, can we assume most dividends will come from VAML? (Indrajit Agarwal, CLSA)
• Answer: Historically, Vedanta's dividend yield was 12-13%, now ~6.7% and normalising toward ~5%. On combined market cap of all five businesses, that implies $1.5-2 billion payout. VAML at ~$18-20 billion market cap may contribute roughly half of group dividends. Boards have flexibility under descriptive dividend policies; 4-5% dividend yield on each company's market cap is the group target. (Ajay Goel, CFO Vedanta Limited)

VRL Deleveraging & Capex Coexistence

• Question: Is most of VRL deleveraging behind? At VAML, what leverage is comfortable, and when does next-phase expansion spending begin? (Sumangal Nevatia, Kotak)
• Answer: VRL debt is down from $10B to ~$5B; target is $3B. Consolidated Vedanta India EBITDA run-rate is $9.5-10 billion with ~50% cash conversion — ~₹5-5.5 lakh crore FCF. Growth (₹20,000 crore capex FY27), deleveraging ($2-2.5B at VRL), and shareholder rewards can coexist. Last 3 years of deleveraging did not postpone or slow any announced capex — bigger projects were initiated during that period. At VAML: net debt ~₹29,500 crore, leftover committed capex ~₹7,800 crore over 18-24 months (includes Balco, Lanjigarh augmentation, mines). Next-phase 3 Mtpa expansion details to be presented to the market within a quarter; capex at ~$2,500/ton, phased over 3+ years with initial outflow only at ~10% of total. (Ajay Goel; Arun Misra, ED Vedanta Limited; Anup Agarwal; Rajesh Kumar)

Bauxite Mine Economics: CGMALAI & Transfer Pricing

• Question: What is the difference between captive and bought-out alumina, and what savings will CGMALAI deliver? Also, since CGMALAI is under VAML and BALCO separately, how does transfer pricing work? (Sumangal Nevatia, Kotak; Pinakin Parekh, HSBC)
• Answer: At today's API, the difference between captive and bought-out alumina is ~$50-60/ton. CGMALAI (captive bauxite) adds another $40-50/ton reduction as it ramps. Transfer is at arm's length per governance norms. BALCO's coal comes from Bara mine; bauxite from VAML mines goes to Lanjigarh, and alumina transfers to BALCO are arm's length. CGMALAI: only approval remaining is consent to operate, expected this quarter; mining to start after monsoon with 1-2 Mt in FY27 and 6-7 Mt in FY28. (Ajay Goel; Rajesh Kumar; Anup Agarwal)

Sakti Restoration Status & PPA Strategy

• Question: What regulatory approvals are needed to restart Sakti, and how are you approaching untied PPA capacity? (Abhishek Poddar, Citadel)
• Answer: Contractor is already working at site; 26% of revival completed. Boiler inspector and district authorities intimated; in-stage inspections ongoing; final certification needed before start, targeted end September. No hurdles currently. On PPAs: 500 MW tied to Tamil Nadu (5-year) and recently 1-year Kerala contract at ₹5.96-5.97/kWh — among the best rates. We're being selective, given rising DAM rates (up ~₹1/kWh YoY) and growing power demand. (Rajinder Ahuja, CEO Vedanta Power)

VAML Cost Drivers & Future Savings

• Question: What drove the QoQ reduction in hot metal cost, and what is the outlook? (Amit Murarka, Axis)
• Answer: QoQ cost reduction from increased captive alumina consumption, lower coal prices, and small rupee/dollar effect versus the Middle East impact absorbed last quarter. Q2 will be marginally higher due to planned monsoon shutdowns. Savings from here: $175-200/ton over 3-4 quarters, with ~70% from alumina+bauxite and balance from coal. (Anup Agarwal)

VRL Cash Outflows & Brand Fee

• Question: What are the exact cash requirements at VRL for FY27, FY28, and FY29, and how are they funded? Is the brand fee fixed? (Raashi Chopra, Citi)
• Answer: VRL debt ~$5 billion as of June. For the remainder of FY27: interest ~$300M + KCM ~$100M = ~$400M, mostly funded via dividends (VAML dividend ~$175M). FY28: ~$1 billion (loan repayments $330M, interest $350M, KCM $350M), funded by brand fee ($400-450M) plus balance via dividends. FY29: ~$730M. Brand fee: 3% across most businesses (0.75% for power and copper), valid till 2038 and fixed till March 2029. (Ajay Goel)

Zinc International Ramp-up & Costs

• Question: What are the volume and cost expectations for Zinc International in FY27 and beyond? (Raashi Chopra, Citi)
• Answer: Immediate goal is 300 kt, then 500 kt, then 750 kt. Gamsberg Phase 2 (concentrator commissioning in August) adds 200 kt of capacity; at 450 kt, costs should come down to ~$1,200/ton. FY27 volumes will be close to guidance despite a small shortfall at the start; BMM Swartberg has transitioned from fixed to variable cost model, which is already reducing costs quarter over quarter. Cost guidance may be revised in H2 if needed. (Navin Jaju, CFO VISL; Charanjit Singh, IR)

Vedanta Ltd Capex Breakdown

• Question: What is the FY27 growth and sustaining capex for Vedanta Limited? (Raashi Chopra, Citi)
• Answer: Growth capex: ~₹7,000 crore (Zinc India ₹5,000 crore; balance ₹2,000 crore for other businesses). Maintenance capex: ~₹4,000 crore, of which ~70% is Zinc India and the rest Zinc International. (Ajay Goel)

No Intercompany Loans Among Entities

• Question: With five listed entities having different cash flows, is it fair to assume no intercompany transactions will occur? (Indrajit Agarwal, CLSA)
• Answer: Routine RPTs are a norm for any large conglomerate and will be fully compliant with governance requirements. However, we are not forcing any intercorporate loans or deposits between the five companies and Vedanta Resources going forward. (Ajay Goel)

Key Takeaway

Vedanta Group delivered a strong first quarter as a demerged five-entity structure, with VAML leading with record revenue of ₹21,005 crore (+45% YoY) and EBITDA of ₹10,499 crore (+134% YoY), alongside Vedanta Limited's ₹8,469 crore EBITDA (+98% YoY) at 57% margin. The demerger generated ₹71,000 crore in combined market cap appreciation during Q1, and all entities received rating upgrades (VAML and Power at AA; Vedanta Ltd at AA+). Management's strategic focus is on backward integration — Lanjigarh captive alumina ramp-up toward 90%, CGMALAI bauxite (after-monsoon start), Kurloy coal (2 Mt FY27, 8 Mt FY28) — projecting a $175-200/ton cost reduction in hot metal over the next 3-4 quarters. Capital discipline remains evident: group capex of ~₹20,000 crore in FY27 coexists with VRL deleveraging from $5B to $3B and a 4-5% dividend yield target across all entities. Key watch points: Sakti Unit 1 restart (end Q2), monsoon cost impact on Q2 aluminium margins, CGMALAI regulatory approvals, and only 28% of aluminium volumes hedged. Management guided toward a $9.5-10 billion consolidated EBITDA run-rate for Vedanta India, with 3 Mtpa new aluminium expansion details expected within a quarter.