IBEF: July 12, 2019
Vedanta Ltd, a natural resources conglomerate, plans to invest nearly half of its three-year capital expenditure of Rs 55,000 crore (US$ 7.6 billion) in its metals business. This comes after there was decline in prices over the past year.
Prices of base metals have declined in the last fiscal year. Copper prices fell 2.89 per cent, aluminium 4.72 per cent, lead 16.41 per cent and zinc 8.66 per cent. But this has not affected the performance of the company, Vedanta.
The company have a capex programme of Rs 55,000 crore (US$ 7645 million) in the next three years. Out of this, Rs 25,000 crore (US$ 3475 million) is in base metals, mainly in zinc, another Rs 20,000 crore (US$ 2780 million) in oil and gas, and Rs 10,000 crore (US$ 1390 million) in aluminium. Vedanta expects revenue to grow 60-70 per cent across businesses and at least 50 per cent in volumes. The capex will be almost exclusively funded from internal growths. During FY19, the company spent Rs 10,000 crore (US$ 1390 million) on capex.
India’s biggest aluminium producer, Vedanta, strategies to raise production by 50 per cent to up to three million tonnes of integrated aluminium. It also aims to become the world’s top zinc producer and among the top three silver producers.
Vedanta plans that the Union budget’s target of investing Rs 100 trillion in infrastructure over the next five years will help in urbanization and industrialization. In 2018-2019, Vedanta posted revenue of Rs 93,373 crore (US$ 1297.8 million) with earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 31 per cent at Rs24,961 crore (US$ 3469 million). Free cash flow increased 47 per cent to Rs 11,553 crore (US$ 1605 million).
India presently has a resource import bill of US$ 465 billion. India’s geology is like that of Brazil, Australia and South Africa, where the natural resources sector contributes 8-10 per cent of the gross domestic product (GDP) whereas contribution in India is around 4 per cent.
At present, India imports around 80 per cent of its oil & gas requirements amounting to US$ 150 billion. Vedanta aims to double its existing contribution of 27 per cent of nation’s production. Vedanta is also the largest private property holder in the country with the acquisition of 53 new blocks under the new licensing policy. The company is expanding in Rajasthan’s Barmer block and planning to invest around US$ 3 billion
The company plans to re-open the Thoothukudi copper smelter in Tamil Nadu because of the need from local economy. The plant which produced about US$ 200-250 million in profit was shut more than a year back because of the police firing on protesters that killed 13 people.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.