Vedanta Aluminium Metal Ltd (VAML) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Vedanta Aluminium Metal Limited's Q2 and half year FY26-27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. From the management side, we have Mr. Charanjit Singh, Group Head Investor Relations; Mr. Rajesh Kumar, CEO, VAML; and Mr. Anup Agarwal, CFO, VAML. I now hand the conference over to Mr. Rajesh Kumar for his opening remarks. Over to you, sir.
Rajesh Kumar (Vedanta Aluminium Metal Ltd): Good evening, everyone, and thank you for joining Vedanta Aluminium Metal Limited Q2 FY27 earnings update. VAML delivered a quarter of record production, higher value-added volumes, and a strong financial performance. Aluminium production reached an all-time high of 649,000 tons, up 5% year-on-year, and 3% up quarter-on-quarter. Alumina production also reached a record of 895,000 tons, increasing 37% year-on-year and 8% quarter-on-quarter, with more more than 1 million tons targeted in the next quarter. Value-added production reached an all-time high of 432,000 tons, up 31% year-on-year and 11% quarter-on-quarter, reinforcing our strategic shift towards 90% VAP mix ambition. PFA, primary foundry alloy production, increased 46% and billet production increased 9%. Domestic sales achieved a quarterly record of 338,000 tons. This stronger VAP production and domestic mix supported by robust aluminum demand translated into stronger realizations with LEP increasing to $453 per ton compared to $205 per ton year-on-year. Going forward, our focus is on structural cost improvement through operating scale and deeper backward integration. The next phase of volume growth will be driven by progressive ramp-up of Lanjigarh and increase in metal volume from BALCO potline 3, which will come to full capacity in, by the end of this year. At BALCO potline 3, currently, 50 50% of the pots are in full production, and we will reach the full capacity run rate by the end of this year. Alongside this, VAML continues to strengthen the captive resource position. Consent to operate for Sijimali was obtained in September, and BALCO has been declared as the preferred bidder for Karlapat bauxite block, driving captive bauxite security, while Kuraloi and Ghogharpalli will increase the captive coal contribution. As we scale our operations, our focus remains on disciplined execution, cost competitiveness, and expanding portfolio of value-added products, enabling us to increase enduring value for all our stakeholders and meet the growing demand for aluminum. We are also conscious of our environment footprint, and we have increased our renewable energy mix from 520, from 321 megawatt in Q1 to 367 megawatts in Q2 in H1, and in the whole financial year, we want to have RE mix of more than 400 megawatts. We are also looking towards sustainable requirement or consumption of our fly ash
Rajesh Kumar (Vedanta Aluminium Metal Ltd): to cement and many other areas like road construction. So, overall, we have strengthened our governance in terms of the sustainability. And we have secured the second position in the DJSI ranking and we look forward to further improve our performance. Now, I hand over to Anup to take you through the financial performance.
Anup Agarwal (Vedanta Aluminium Metal Ltd): Thank you, Rajesh ji, and good evening, everyone. We have sustained our performance momentum in quarter two, supported by record production, improved marketing mix, and sustained cost discipline, resulting in continued balance sheet strengthening. This was despite a sequential moderation in metal prices, demonstrating the strength of our integrated operating model and the impact of the structural improvements underway across the business. At a headline level, revenue for the quarter stood at Rs. 22,066 crore, an increase of 41% year-on-year and an increase of 5% quarter-on-quarter. On the cost side, hot metal cost in quarter two stood at $1,722, up 1% quarter-on-quarter with the structural benefit in alumina cost being offset by continuing inflationary pressures on carbon and fuel oil. Our marketing mix strengthened meaningfully during the quarter with value-added sales increasing to 433 kt, up 30% year-on-year and up 13% sequentially. This shift supported stronger realization and reinforces the progress towards a premium product portfolio. EBITDA during the quarter was at 10,192 crore, up 83% year-on-year and lower 3% sequentially. Profit after tax stood at Rs. 6,187 crore, more than doubling YoY. Sequentially, profit after tax was almost flat, but for the exceptional charges of around 400 crore recognized in quarter two. We maintained a healthy cash and cash equivalent of Rs. 6,318 crore, providing a strong liquidity cushion and adequate financial flexibility. Consequently, our net debt to EBITDA ratio improved from 0.9x in quarter one to 0.7x at the end of quarter two. Our credit profile continues to receive positive external validation. ICRA and CRISIL have reaffirmed our AA+ ratings with a stable outlook, while India Ratings has now upgraded Vedanta Aluminium to AA+ stable. These ratings reflect the strength of our earnings, improved leverage profile, and continued financial discipline. Our return on capital employed stood at 60%, underscoring our commitment to profitable growth and prudent capital allocation. We've also paid a dividend of Rs. 8 per share during the quarter, translating into a dividend yield of 2%, balancing shareholder returns with continued investment in our growth and integration projects. Turning to the EBITDA bridge, quarter two EBITDA stood at Rs. 10,192 crore, up 83% YoY, driven by a 26% contribution from operational factors with higher volumes, improved cost and marketing mix, and the balance coming from market and one-offs. Sequentially, as you can see, LME was down 10%, and impact of which has been majorly offset by higher volumes and other operational factors. On the net debt, we've reduced the net debt by Rs. 3,090 during the quarter from Rs. 29,532 crore at the end of quarter one to Rs. 26,442 crore at quarter end after accounting for dividend payment of Rs. 3,190 crore. Importantly, the reduction in net debt was underpinned by cash flow of Rs. 6,043 crore during the quarter. This demonstrates the cash conversion strength of the business even after funding CapEx. During the quarter, we refinanced more than Rs. 7,000 crore of debt. Our average term debt maturity now stands at 4.1 years with the bulk of the maturities getting pushed to FY '31 and beyond. The average interest rate cost is now around 8.5%. Turning to below EBITDA items, depreciation cost is in line with the project capitalization and routine CapEx, while finance cost declined due to lower average borrowings. The profit after tax, as I mentioned, before exceptional items remained broadly in line with quarter one. Beyond the reported financial, digit-
Anup Agarwal (Vedanta Aluminium Metal Ltd): and AI, are becoming embedded value levers across operations and enabling functions. We have identified projects carrying an annualized benefit potential of $87 million. Looking at the value proposition slide, our strategic priorities remain intact. We are scaling towards 3 million tonnes of aluminum and 5 million tonnes of alumina capacity supported by the ramp up at BALCO and Lanjigarh. At the same time, the commissioning of our bauxite mines and captive coal will progressively strengthen raw material security and lower our structural cost base. Post completion of the projects and the debottlenecking, we are targeting a hot metal cost of around $1,550 per tonne and a value-added product mix of more than 90%. These levers, together with higher volumes and greater domestic market penetration, positions us to unlock exceptional value. The proposition is also supported by our scale and marketing positioning. At the targeted 3.9 million tonne production capacity, VAMAL would rank among the largest global producers while Indian market offers exposure to an estimated 40% demand growth between CY '25 and CY '30. With the commissioning of the second zone at BALCO, we are now poised to operationalize the third and final zones in Q3, Q4 to reach the target run rate of 435 ktpa by March exit. On our alumina production, we are targeting a 10% incremental refinery output each in Q3 and Q4, thereby ending the year at a design capacity. This would mean 85% captive alumina mix as we exit the year and also with OMC expansion and Sijimali startup, we expect the captive bauxite to go up from 40% today to around 75% as we exit the year. So, we have some planned power plant shutdowns in Q3. Post that, we expect the power cost to come down to the Q1 levels. Additionally, we are also targeting operationalization of our coal mines in H2, and we believe cumulatively these levers will give us a cost reduction of around $100 as we exit the year. Any relaxation in the input commodity pressures being seen on account of the Middle East disruption would further augment this savings. At current LME along with the planned value-added products, the expected cost levels, we expect to exit the year at an EBITDA run rate of $5 billion. Our cost guidance for the full year remains unchanged, with some escalation in Q3 on account of input inflation and planned power plant shutdowns. On the hedging front, for the balance year, we are hedged 22% of our volume at an average price of $3,274 per tonne. In closing, Vedanta Aluminium's performance in Q2 reflects the resilience of our integrated business model. We remain confident in sustaining our performance through disciplined execution of our operational priorities and continuing to deliver value for our stakeholders. Thank you, everyone, and now I hand over to operator for Q&A.
Moderator: Thank you very much. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and then one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Your first question comes from the line of Indrajit Agarwal with CLSA. Please go ahead.
Indrajit Agarwal (CLSA): Hi. Thank you for the opportunity. I have a few questions. First, thank you for the detailed operational update. As you mentioned, you exit the year with a $5 billion EBITDA run rate and assuming somewhere around 6,000-odd crore of CapEx, which is like almost higher than what the current run rate is, how should we look at the capital allocation policy for the second half of this fiscal and getting into next fiscal, so in terms of increase in CapEx, dividend, how do you want to split that?
Anup Agarwal (Vedanta Aluminium Metal Ltd): So thank you, Indrajit. So, see, see there are two things. One, if you will look at the split, okay, between the standalone and the consolidated, you'll find that we we have higher profitability and the cash for even the standalone. Now at 50,000 crore or or or or $5 billion, say 45
Anup Agarwal (Vedanta Aluminium Metal Ltd): crore now. One can expect that even after accounting for the cash of around 6,000, 7,000 crore, we will be left with 50% of the cash you can assume around 25,000 odd crore. And even on the standalone basis, 17, 18,000 crore. Now, the 17, 18,000 crore can be used for three purposes. One, deleveraging. The second for the new new expansion projects which which is which for which we are on the drawing board. And the third for the dividend. And on the dividend, you are aware that we have been guiding that based on the market cap one can assume a 3% to 5% broadly the dividend every year. So, Indrajit, I hope I have answered your questions.
Indrajit Agarwal (CLSA): Sure, when can we expect the new projects to start incurring capex in terms of the further expansion?
Rajesh Kumar (Vedanta Aluminium Metal Ltd): So, we are in very advanced stage of the acquisition of land both for the refinery as well as the smelter. So, basically we have we once the land acquisition happens, the other part of the team is making on the drawing board the layout of the facility, so that's also done. So, once we are more or less closer to the acquisition of the land and the paperwork is done, then we can you know, immediately because we are ready to place orders. We already did the BALCO project as you all know in record time and with the least capex. So, we we have a potential to execute things very rapidly and very quickly. And we will be once the land part is done, we are ready with what we need to do in terms of the ordering and things like that. And we will be starting that once we are through with the approval process.
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