The Vedanta Investment Case
Our investment case is focused on delivering sustainable long-term returns to our shareholders and creating value for our broader stakeholder base.
1 A large, low-cost and diversified asset base with an attractive commodity mix
Vedanta’s large-scale, diversified asset portfolio, with attractive cost positions in some of the core businesses, positions the Company well to deliver strong margins and free cash flows through the commodity cycle. Vedanta’s focus on base metals and oil, commodities with strong fundamentals and leading demand growth, makes the Company’s commodity mix particularly attractive.
In FY2018, markets have seen an upturn driven by improved demand and supplyside constraints. This has benefitted the commodities sector, and in particular Vedanta’s core commodities, including zinc, aluminium and oil & gas.
2 We’re ideally positioned to capitalise on India’s growth potential
India is Vedanta’s main market, and one that has huge growth potential. Current per capita metal consumption in India is significantly lower than the global average. Urbanisation and industrialisation, supported by government initiatives on infrastructure and housing, continue to drive strong economic growth and generate demand for natural resources.
We are strongly and uniquely positioned to benefit from this growth due to our:
- Established operations in India;
- Strong market position across our businesses: we are India’s largest base metals producer and the largest private sector oil producer; and
- Operating team with a strong track record of executing growth in India.
India Key Metrics
Per capita income (real)
India Demand Potential
Source: Wood Mackenzie, EIA, BMI, Global Insight
Note: All commodities-demand correspond to primary demand
3 Well-invested assets driving cash flow growth
We are ramping up production across a number of our businesses as a result of investments in the past years. We have already started seeing the results of our investments, with Zinc India and Aluminium delivering record output in the past year. Now, with the new growth plans for Oil & Gas that we initiated in FY2018, we expect further delivery on ramp-ups and strong growth in FCF generation.
4 Operational excellence and technology, driving efficiency and sustainability
We constantly strive to improve our operations, integrate our businesses through the value chain and optimise our performance through operational efficiencies and innovative technological solutions. We employ these tools to further ensure that our operations have a positive impact on our stakeholders and, more broadly, society.
5 Strong financial profile
Our operational performance coupled with a strong focus on optimisation of capital allocation has helped strengthen Vedanta’s financial profile. In FY2018, operational delivery, supported by the robust price environment, has helped deliver:
- Strong FCF post growth capex of ` 7,880 crore
- Gross debt reduction of ` 8,512 crore
- Robust ROCE of 17.5%
- Highest ever interim dividend of ` 7,881 crore paid in FY2018 (dividend yield of 8%)
- Amongst the strongest balance sheets, with respect to Net Debt/ EBITDA (0.9x) and gearing, amidst global diversified peers, and the best in India
- Cash and liquid investments of ` 36,201 crore
- CRISIL (subsidiary of S&P) and India Ratings revised outlook to ‘AA/Positive’ from ‘AA/Stable’ in March 2018 and October 2017, respectively
1. Peers include BHP Billiton, Rio Tinto, Anglo American, Glencore, Teck Resources, Freeport, Hindalco, Tata Steel and JSW Steel
2. Gearing is calculated as Net Debt divided by the sum of Net Debt and Equity (based on reported numbers)
3. Net Debt as per last reported EBITDA as per CY2018 consensus estimates
6 Proven track record
We have a proven management team with a diverse and extensive range of sector and global experience who ensure that operations are run efficiently and responsibly. We have taken a disciplined approach to development, growing our production steadily across our operations with an ongoing focus on operational efficiency and cost savings. Since our listing in 2003, our assets have delivered an average of 16% CAGR production growth.
Note: All commodity and power capacities rebased to copper equivalent capacity (defined as production x commodity price/copper price) using average commodity prices for FY2018.
Power rebased using FY2018 realisations, copper custom smelting production rebased at TC/RC for FY2018, iron ore volumes refer to sales with prices rebased at realised prices for FY2018