Vedanta Group Eyes $6 Billion Ebitda In FY25, Reiterates Guidance On Operational, Profitability Targets

Mining conglomerate Vedanta Group is eyeing $6 billion of pre-tax profits in the next financial year and scaling it to $7-7.5 billion in the following year on the back of operational efficiencies across businesses.

"The building blocks are already in place, and largely under our control for EBITDA augmentation. The increase will be driven by ongoing cost optimization, price increases and volume ramp-up," Ajay Goel, CFO, Vedanta Limited said at a recent analysts' meet.

The company is expected to clock nearly $5 billion of EBITDA in FY24 (April 2023 to March 2024); adjusting for one-time gains of the Cairn arbitration, the operational EBITDA for FY24 will be $4.4 billion.

The ambitious EBITDA target of $6 billion represents a jump of over 35%.

"Most of this growth, nearly 15%, will be driven by cost optimization measures. Price upticks, for example through increase in value added aluminium products, will account for another 8%. Ramp-ups in production volumes across the businesses will contribute another 12% growth in EBITDA," explained Goel at the analyst meet.

The group has aggressively pursued cost optimization measures over the past few quarters, slashing production costs in its key segments aluminium and zinc, by 35% and 15% respectively over the past six quarters.

The Group is also continuously investing in capacity expansion and integration, with overall aluminium capacity slated to increase from 2.2 million tonnes per annum to 3.0 million tonnes in the next few quarters. Its international Zinc business is also expected to ramp up production. The dual levers of continued cost efficiency and production ramp up are expected to power the move towards $6 billion EBITDA.

Billionaire Anil Agarwal-owned Vedanta Limited on Sep. 29, 2023 announced creation of independent verticals through demerger of underlying companies, mainly its metals, power, aluminium, and oil and gas businesses to unlock potential value.

As part of the vertical split of Vedanta Ltd, shareholders will get 1 share of each of the 5 newly listed companies for every 1 share of Vedanta. After the demerger, the businesses of Hindustan Zinc as well as the display and semiconductor manufacturing units will remain with Vedanta Limited.

"The demerger is expected to simplify the Group's corporate structure with sector-focused independent businesses. Each of our businesses is at global scale hence the board decided to go for a demerger. We intend to build an asset ownership and entrepreneurship mindset where each company would chart out its growth trajectory."

"The demerger will give global investors, including sovereign wealth funds, retail investors, and strategic investors, direct investment opportunities in dedicated pure-play companies. With listed equity and self-driven management teams, the demerger would also provide individual units a platform to pursue strategic agendas more freely and better align with customers, investment cycles, and end markets," Vedanta had said in its demerger announcement.