Vedanta Oil and Gas Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

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

Analysts

9 Abhishek Podar, Akhilesh Kumar, Amit Murarka, Ashish Kejriwal, Indrajit Agarwal, Jashindeep Singh, Rashi, Ritesh Shah, Sabri, Shubham Jain, Sumangal Nuwatia

Financials & KPIs

Vedanta Oil and Gas

Vedanta Power

Vedanta Iron and Steel (VISL)

Vedanta Aluminium (VAML)

Vedanta Limited (Continuing Operations)

Geographic & Segment Commentary

• Vedanta Oil & Gas (Rajasthan): Working interest production averaged 51.1 kboepd. Direct operating cost trend sustained, with FY27 expected to align with FY26 levels. Focus on decline management, well interventions, and reservoir optimization. Cost discipline driven by optimizing commodity consumption and targeted interventions.
• Vedanta Oil & Gas (Offshore): Production of 11.6 kboepd benefited from low-pressure operations and focused well interventions. Continued operational optimization remains priority.
• Vedanta Power (Mahanadi): Delivered highest ever quarterly EBITDA of ₹112 crores on highest sales volume (~1,350 million units). Import coal cost reduced 12% YoY by replacing imported coal with Indian coal (65-70% consumption).
• Vedanta Power (Athena): Plant availability improved to 86% from 77% QoQ. Achieved highest biomass co-firing of 7.9% among MCR region power plants. Ash utilization at 94% with ash revenue up to ₹9 crores.
• Vedanta Power (Shakti): Favorable regulatory outcome on short supply method (potential ₹300 crore refund) and recovery of ash costs (up to ₹40 crores annually). Unit 1 restart expected by Q2 FY27 end; Unit 2 completion targeted Q4 FY27.
• Vedanta Iron & Steel (Steel): Saleable production at 58,280 tonnes with 12% EBITDA margin, driven by better realization, favorable export market, and cost initiatives. Bokaro expansion received Stage 1 forest clearance; project on track for FY27 end completion.
• Vedanta Iron & Steel (Iron Ore): Production up 4% YoY to 2.6 million tonnes. EBITDA margin improved 24% YoY on better realization and cost efficiencies. QoQ moderation due to seasonal impact, higher discounts on low-grade ore, and elevated ocean freight.
• Vedanta Aluminium (Aluminum): All-time high production of 632kt (+5% YoY, +3% QoQ). VAP output at record 389,000 tonnes (+14% YoY) with goal of 90% VAP share. Billet production +18% QoQ, alloy production +38% QoQ.
• Vedanta Aluminium (Alumina): Production of 826kt (+41% YoY, -6% QoQ) impacted by stabilization issues in power plant, red mud filtration, and bauxite handling. Captive mix at 70-72%; target alumina cost of $750/ton in Q2.
• Zinc India: Refined metal production +4% YoY to 260,000 tonnes. Achieved lowest ever cost of production at $851/ton. Silver contributes 46% share of EBIT.
• Zinc International: Mined metal production 48,000 tonnes (including 3,000 tonnes from Black Mountain). Gamsberg production +10% QoQ to 45,000 tonnes; cost at $1,549/ton (-7% QoQ), EBITDA per ton $900.
• Ferrochrome (Trakker): Highest ever ore production up 41% YoY to 153,000 tonnes. EBITDA margin improved to $360/ton (+13% sequentially) with best-ever quarterly EBITDA of ₹101 crores.
• Copper India: Sales of 53,000 tonnes (+3% YoY), highest first quarter sales in 8 years. Phase 1 debottlenecking augmented capacity to 222,000 tpa.

Company-Specific & Strategic Commentary

• Demerger Value Creation: Combined market capitalization of resulting companies grew over ₹71,000 crores post-historic demerger. Demergers effective May 1, 2026, creating five focused listed entities. VRL deleveraged by $1.1 billion across the group in Q1.
• Credit Rating Upgrades: Multiple entities received upgrades. Vedanta Oil and Gas assigned AA/Stable by CRISIL and ICRA. VAML upgraded to AA/Stable. VRL rated at double-B equivalent (decade high) by S&P, Fitch, and Moody's. Vedanta Ltd rated AA+ with stable outlook, highest rating in over a decade.
• Real Estate Monetization: Vedanta plans to demerge industrial lands and properties (2,000+ acres at Vedanta Limited alone) into a pure-play real estate company. Aspirational value of ₹30,000 crores; timeline of 9-12 months for NCLT process.
• Green Energy Initiatives: VAML renewable energy supply increased to 198 MW (+60% sequential), on track for 371 MW by FY27 end. 20% ash utilization contributing to increased dike space; new RO facility reduced freshwater consumption by 8%.
• Growth Projects - VAML: Balco Pot Line 3 ramp up on track (24kt produced in Q1 vs 22kt plan). Kurloi coal mine mining lease received; plan to start this quarter. CGM Mali bauxite mine: Stage 2 forest clearance received, targeting 1-2 million tons this fiscal year, 6-7 million tons next year.
• Growth Projects - Zinc: Fertilizer plant coal commissioning initiated; hot acid leaching plant at Dariba targeted for current quarter. 10 MTPA silver refining plant expected Q4 FY28; 250,000 tpa smelter expansion expected Q2 FY29. Gamsberg Phase 2 to add 200,000 tons capacity (commencing August).
• Refinancing Program: VRL raised $1.7 billion in international bonds at 7.4% (average maturity 8.5 years) and syndicated loan of $2.25 billion at 6.4% (3-year maturity). Targeting reduction of ~280 bps in average funding cost, leading to ₹1,000+ crores annual interest savings.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

VAML EBITDA Reconciliation & Aluminium Sales

• Question: Why does combined EBITDA for Jharsuguda and Balco (₹10,527 crores) differ from reported EBITDA (₹10,499 crores)? What were aluminum sales? (Akhilesh Kumar, Emkay Global)
• Answer: The difference is a small consolidation adjustment for intercompany transactions between Balco and the parent. Aluminum sales for the quarter were 615kt. (Anup Agarwal, CFO VAML)

Alumina Cost Trajectory

• Question: How will alumina production reach 4.1 million tonnes given Q1 annualized rate is lower? What is the trajectory for alumina costs? (Unidentified Analyst, CLFA)
• Answer: Monsoon months are difficult for power assets and alumina production; H2 will be significantly higher, following the same pattern as last year. Alumina cost of $780 in Q1 will move closer to $750 in Q2 with increased captive mix (70-72%). Further reduction toward $700 depends on Lanjigarh ramp-up and captive bauxite. (Anup Agarwal, CFO VAML)

Hedging Position

• Question: What were Q1 hedging volumes and strike prices? (Unidentified Analyst)
• Answer: Q1 hedged ~293kt at strike price of $2,813. For balance FY27, hedged 28% of volumes at average $3,062 per ton. Q2 specifically: 270kt hedged at $2,830. (Anup Agarwal, CFO VAML)

Dividend Policy & Capital Allocation

• Question: Can we model dividends from Vedanta Aluminium primarily? What is the commentary on group payouts? (Indrajit Agarwal, CLFA)
• Answer: Historical double-digit dividend yields have been normalized to 5% on combined market capitalization ($1.5 billion payout). Vedanta Aluminum at ~₹150-200 billion market cap could contribute half the dividends. Policy is now descriptive rather than prescriptive—boards have flexibility based on capex needs, profits, and payouts. (Ajay Goel, CFO Vedanta Group)

VRL Deleveraging & Capital Co-existence

• Question: Is the large part of VRL deleveraging behind us? How do growth and deleveraging coexist? (Sumangal Nuwatia)
• Answer: VRL debt down from $10 billion to $5 billion over three years. Continued deleveraging of $2-2.5 billion this year alongside ₹20,000 crores group capex. EBITDA outlook of $9.5-10 billion with ~50% cash conversion means ₹5,000-5,500 crores free cash flow—no need to choose between growth and deleveraging. Last three years of deleveraging did not postpone any announced capex. (Ajay Goel, CFO Vedanta Group; Arun Misra, CEO Vedanta Group)

VAML Capital Structure & Expansion

• Question: What is VAML's net debt, ongoing capex, and next phase of growth? (Sumangal Nuwatia)
• Answer: Net debt at ₹29,500 crores (down from ₹33,000 crores). Remaining capex of ₹7-8,000 crores over 18-24 months includes Balco, Lanjigarh augmentation, and mine development. FY27 capex ~₹5,000 crores (+₹2,000 crores maintenance). Next phase of 3 MTPA expansion details expected within a quarter; at ~$2,500/ton capex benchmark, phased outflows begin with ordering phase at 10% initial cost. (Anup Agarwal, CFO VAML)

VISL Bokaro Expansion

• Question: What are the next hurdles for Bokaro Phase 2 expansion? (Sumangal Nuwatia)
• Answer: Stage 1 forest clearance received; Stage 2 expected by end of Q2. Expansion project to be completed by end of FY27. (Navin Jaju, CFO VISL)

Captive vs Bought-out Alumina Savings

• Question: What is the delivered price difference between captive and bought-out alumina? (Sumangal Nuwatia)
• Answer: At today's API levels, the difference is $50-60 per ton. CGM Mali will contribute additional $40-50 per ton reduction once ramped up (targeting 1-2 million tons this year, 6-7 million next). All numbers at the alumina level. (Anup Agarwal, CFO VAML)

Oil & Gas Revenue Flat Despite Higher Prices

• Question: Oil prices up ~30% but revenue flat QoQ—explain? (Sabri, MK Global)
• Answer: Cyclic sales pattern: ~85% of volume sold in Q1 with inventory liquidation expected post-monsoon. This is a typical seasonal pattern. (Arpit Mundra, CFO Vedanta Oil and Gas)

VAML Cost Reduction Drivers

• Question: What drove hot metal cost down despite inflation? What is the forward outlook? (Amit Murarka, Axis Capital)
• Answer: QoQ reduction from increased captive alumina consumption, lower coal prices, and rupee depreciation. Q2 costs will be marginally higher due to planned power plant shutdowns during monsoon. Full year within ₹1,650-1,700 guidance with Middle East impact included. Cost reduction of $175-200 expected over next 3-4 quarters: 70% from alumina/bauxite (Lanjigarh ramp-up toward 90% captive, CGM Mali) and 30% from coal (Ghogarwali). (Anup Agarwal, CFO VAML)

Kurloi Coal Mine Ramp-Up

• Question: What are the volume expectations from Kurloi in FY28 and FY29? (Amit Murarka, Axis Capital)
• Answer: FY27 target of up to 2 million tons; next year's plan is 8 million tons. MDO partner already appointed; mining can start as soon as approvals are received. (Rajesh Kumar, CEO VAML)

Saudi Arabia Exploration

• Question: Any firm capex for the Saudi asset? (Ritesh Shah, Investec)
• Answer: Exploration partner finalized; targeting 24 months for the initial phase. Capex approval details to be announced post-partner finalization. (Arun Misra, CEO Vedanta Group)

OMC Bauxite Procurement

• Question: What is the procurement rate from OMC and how has it changed? (Ritesh Shah, Investec)
• Answer: Domestic bauxite mix at 46-50%. Alumina cost from domestic bauxite approximately $300/ton. Specific numbers on OMC procurement are subjudice, and management cannot disclose details due to court order. (Anup Agarwal, CFO VAML)

VISL Intercompany Deposits

• Question: What is the status of the ₹960 crore ICD at VISL? (Ritesh Shah, Investec)
• Answer: As part of demerger restructuring, ₹13,000 crores of intercompany loans (out of ₹14,000 crores) were waived. The ₹960 crore balance is payable to Vedanta Limited as part of the restructuring. (Navin Jaju, CFO VISL)

Real Estate Value Unlocking

• Question: How should we understand the ₹30,000 crores real estate value? (Ritesh Shah, Investec)
• Answer: Intention to demerge all non-core real estate (2,000+ acres at Vedanta Limited alone) into a pure-play company. The ₹30,000 crore figure is aspirational; NCLT process expected to take 9-12 months. Similar to the main demerger's two-year process. (Arun Misra, CEO Vedanta Group)

Shakti Energy Plant Restart

• Question: What regulatory approvals are required for Shakti restart? (Abhishek Podar, Citadel International)
• Answer: Contractor already working; 26% of revival completed. Expected startup by end of September/first week of October. All approvals (boiler, cutting) already obtained before startup work began. No hurdles currently visible. (Rajender Singh Ahuja, CEO Vedanta Power)

Vedanta Power PPA Status

• Question: What is the PPA situation for the new capacities? (Abhishek Podar, Citadel International)
• Answer: 700 MW commissioned at Mahanadi and 600 MW at Athena. Tied up 500 MW with Tamil Nadu (5-year tenure, one of the best rates) and new contract with Kerala at ₹5.96-5.97/unit (1-year). Total 600 MW tied up; company being selective as power demand growth supports better rates. (Rajender Singh Ahuja, CEO Vedanta Power)

VAML Long-Term Cost Reduction

• Question: What are the key cost-saving measures over the next few years? (Jashindeep Singh, Nomura)
• Answer: Target of $175-200 reduction from current $1,700/ton over next 3-4 quarters. Sources: Lanjigarh ramp-up to 5 million tons (captive mix toward 90%), CGM Mali captive bauxite, and Ghogarwali coal benefits. 70% from alumina/bauxite, balance from coal. (Anup Agarwal, CFO VAML)

Balco Capex & Cash Management

• Question: What is Balco's capex and how will its cash be deployed? (Ashish Kejriwal, Nuvama)
• Answer: FY27 Balco capex ~₹2,000-2,500 crores of the ₹5,000 crores total. Balco produced 24kt from new pot line (vs 22kt plan); 25% remaining capacity being commissioned, full production by end of this quarter. Options include Barra mines development, coal gasification (early-stage government initiative), and power assets growth. All options on the table including dividend payments; BALCO could even participate in the 3 MTPA expansion. (Anup Agarwal, CFO VAML; Rajesh Kumar, CEO VAML)

VRL Refinancing & Cash Requirements

• Question: What is the outcome of VRL deleveraging and refinancing for FY27 and FY28? (Rashi)
• Answer: Debt at ~$5 billion as of June. FY27 remaining cash need: $400 million (interest $300 million, TCM $100 million), funded mostly through dividends. FY28 need ~$1 billion (one-third each: loan repayment $330 million, interest $350 million, TCM $350 million). FY29 at ~$730 million. Brand fee agreement fixed at 3% (power and copper at 0.75%) until March 2029. Through contractual brand fees and routine 3-4% dividends, VRL will be self-managing. (Ajay Goel, CFO Vedanta Group)

Zinc International Volumes & Costs

• Question: What should we expect for Zinc International volumes and costs? (Rashi)
• Answer: Near-term goal is 300kt, moving to 500kt, eventually 750kt. At 450kt, cost target of $1,200/ton. Phase 2 expansion adding 200kt will combine current 250kt to reach 450kt within a year. BMM restructured from fixed to variable cost model, which will show quarterly cost reductions. (Arun Misra, CEO Vedanta Group; Anup Agarwal, CFO VAML)

Vedanta Limited Capex Guidance

• Question: What is the FY27 growth and sustaining capex for Vedanta Limited? (Rashi)
• Answer: Growth capex ~₹7,000 crores: ₹5,000 crores for Zinc India, ₹2,000 crores for other businesses (Zinc International, Copper). Maintenance capex of ~₹4,000 crores, with ~70% at Zinc India. (Anup Agarwal, CFO VAML)

Intercompany Transactions

• Question: Will there be any intercompany transactions among the five listed entities? (Indrajit Agarwal, CLFA)
• Answer: Routine RPTs are normal for any large conglomerate and will comply with all governance requirements. However, no intercorporate loans or deposits will be forced between Indian entities or to Vedanta Resources. (Ajay Goel, CFO Vedanta Group)

Key Takeaway

Vedanta Group delivered a strong first quarter post-demerger with record performances across multiple entities. Vedanta Oil and Gas reported revenue of ₹2,507 crores and EBITDA of ₹1,232 crores (49% margin) despite natural production decline, maintaining cost discipline at $17.4/barrel. Vedanta Aluminium posted record revenue of ₹21,005 crores (+45% YoY) and EBITDA of ₹10,499 crores (+134% YoY), with all-time high aluminum production of 632kt and ROCE of 42%, while Balco Pot Line 3 ramp-up and CGM Mali approvals progress toward cost reduction. Vedanta Power delivered 38% YoY volume growth despite the Shakti boiler incident, and Vedanta Iron & Steel achieved 54% EBITDA growth. ZINC India delivered lowest-ever cost of production at $851/ton with Gamsberg Phase 2 commissioning imminent. The group's deleveraging continues—VRL debt down from $10 billion to $5 billion with refinancing at lower rates—while management guided to 4-5% dividend yields across entities. Key watch points include the Shakti unit restoration timeline, CGM Mali mine approvals, alumina cost trajectory toward $700, and execution of the ₹20,000 crores FY27 capex across growth projects.