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The six factors that will take Vedanta to $10 12 billion in operating profit next year

business | Dec 6, 2022 2:51 PM IST

The six factors that will take Vedanta to $10-12 billion in operating profit next year

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Dugal denied reports of the Electrosteel sale and said that instead of a sale, the company is looking to expand its capacity there.

The world's largest integrated metal producer, Vedanta Ltd. is expecting operating profit of $10 billion to $12 billion in the next financial year.

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In an interaction with CNBC-TV18, CEO Sunil Duggal highlighted six factors that may help the company achieve that target. The six factors include - a $5-7 billion capex in the next 3-4 years, raising production of oil and gas, steel and aluminum, adding the value added business, operationalise the coal mine, raising alumina capacity from 2 to 5 million tonnes, and finishing the capacity in Electrosteel Steels.
Duggal also expects revenue to hit $30 billion in the financial year 2024 and EBITDA margin to be between 30-35 percent.
"With this strong position and healthy cash flow, we will have many options to pay the debt as well as service the capex requirements," he said.
As of the September quarter, Vedanta had net debt worth Rs 32,144 crore.
Newspaper reports last month suggested that Vedanta plans to sell off Electrosteel Steels Ltd. to focus on its core mining and industrials business as well as deleverage the balance sheet.
Dugal denied reports of the sale and said that instead of a sale, the company is looking to expand its capacity at Electrosteel. The work on completing the unfinished plant is currently underway and will expand the unit's capacity from 1.5 million tonnes to 3.5 million tonnes. That, along with the 1 million tonne capacity for the Value Added Business in Goa will take Electrosteel's total capacity to 4.5 million tonnes.
Vedanta had acquired Electrosteel Steels in June 2018 for Rs 5,320 crore.
Vedanta's CEO also mentioned that if the company does intend to remain in the steel business, it will look to be among the top five players. For the long term, Duggal mentioned that the company can raise its steel capacity to as high as 10 million tonnes.
The company recently approved its third interim dividend of Rs 17.5 per share, resulting in a total payout of Rs 6,505 crore. So far in financial year 2023, Vedanta has announced dividends worth Rs 68.5, higher than brokerage firm Citi's expectations of Rs 60.
On the prospects of future dividends, Duggal mentioned that this is board matter and declaring any further dividend this financial year would depend on the company's financial performance and subsequent cash positions.
Vedanta's priority is to reduce debt at the parent level. It had guided for reducing debt worth as much as $4 billion over the next three years. With metal prices looking up and healthy cash flows, Duggal is optimistic of deleveraging to continue.
Other Key Takeaways:
  • Business conditions good, metal prices looking healthy
  • Expect more stimulus to come in China
  • Inflation pressures are easing in the US
  • Demand for critical metals for decarbonisation has not reduced
  • There is a natural synergy between Hindustan Zinc and the international zinc business
  • Shares of Vedanta are trading 1.6 percent lower at Rs 314.
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