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Vedanta Doesn’t Comment On Delisting; Sees Pick-Up In Oil And Gas Unit

It, however, guided for lower cost of aluminium production in the first quarter of the ongoing fiscal.

 A man waters plants outside the Indian headquarters of Vedanta Resources Plc in Mumbai, India. (Photographer: Adeel Halim/Bloomberg News)
A man waters plants outside the Indian headquarters of Vedanta Resources Plc in Mumbai, India. (Photographer: Adeel Halim/Bloomberg News)

Vedanta Ltd. didn’t comment on its proposed delisting process at a post-earnings call on Monday.

It, however, guided for lower cost of aluminium production in the first quarter of the ongoing fiscal and an uptick in business at its oil and gas unit from the third quarter. The company’s oil and gas and aluminium units contributed nearly 45% of its operational profit in the quarter ended March.

The mining conglomerate, on June 6, reported a surprise loss of Rs 12,521 crore in the quarter ended March on the back of an impairment in its oil and gas, copper and iron ore businesses that was triggered by the Covid-19 pandemic.

The billionaire Anil Agarwal-controlled company had announced last month that its parent, Vedanta Resources Ltd., has agreed to buy its entire public stake at Rs 87.5 per share and take it private. To this, the company said the delisting process would be fair and transparent, in accordance with the regulations of the Securities and Exchange Board of India.

Here are the key takeaways of the post-earnings interaction:

Operational Highlights, Outlook

  • Zinc India operations halted on March 22, 2020, and restarted on April 8.
  • Aluminium smelters and mines ramped up to 40-80% of capacity in April.
  • Zinc International operations started on April 17.
  • Zinc International’s Skorpion mine suspended and put under maintenance from April.
  • Oil production had minimal impact as supply to domestic crude oil buyers continues.
  • Gas demand impacted in fourth quarter of 2019-20 but has normalised now.
  • Oil and gas production to increase significantly in third quarter of 2020-21.
  • Cost optimisation in aluminium division to continue.
  • Aluminium production cost to fall in first quarter of FY21 on sequential basis.
  • Aluminium classified as essentials during lockdown.
  • Aluminium production maintained and registered flattish growth year-on-year.
  • LME aluminium prices looking upward of $1,500/ tonne over the last few days.
  • Steel business has been operating at two-thirds capacity.
  • Steel business to concentrate more on value-added products.
  • Continue to engage with Goa government and community to restart iron ore operations.

Guidance, Debt And Dividend

  • FY21 capex growth to be lower than FY20.
  • Efficient operational efficiency, active management of cost and cash preservation remains key focus for FY21.
  • FY20 dividend policy of minimum payouts on profit availability remains for FY21.
  • Dividend policy is subject to liquidity situation and board decision on future policy.
  • Net debt decreased by Rs 5,683 crores compared to March 31, 2019.
  • Net debt/Ebitda continues to remain at 1.5x (times).
  • Liquidity condition remains comfortable.
  • Cash conservation is the reason behind no payouts.

On Delisting, Impairment

  • Wouldn’t like to comment on delisting process.
  • Vedanta can’t be compared to other global oil and gas players who haven’t taken any impairment charges related to their oil and gas business.
  • Global players would have multiple assets and headwinds when it comes to their oil and gas division.
  • Impairment charges are more in line of mark-to-market policy.
  • FY20 was the third time in the past six years that company booked impairment related adjustments in oil and gas assets.