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Vedanta Targets $6 Billion EBITDA in FY25, Affirms Profit Goal Expectations

June 4, 2024
Finance
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Vedanta Group, a mining giant, is setting its sights on achieving $6 billion in earnings before tax for the upcoming fiscal year, with plans to increase this figure to between $7 and $7.5 billion the year after, thanks to improved operations across its various sectors.

Ajay Goel, the Chief Financial Officer of Vedanta Limited, stated during a recent meeting with analysts that the foundation for increasing EBITDA is well-established and within the company’s control. He attributed the anticipated growth to continuous efforts in reducing costs, raising prices, and expanding production volumes.

For the fiscal year 2024, which spans from April 2023 to March 2024, Vedanta is on track to report close to $5 billion in EBITDA. However, after accounting for one-off earnings from the Cairn arbitration, the operational EBITDA is projected to be $4.4 billion.

The company’s goal to reach a $6 billion EBITDA reflects an ambitious increase of more than 35%. Goel elaborated that nearly 15% of this growth is expected to come from cost-saving initiatives. Additionally, price hikes, such as those on higher-value aluminium products, are predicted to contribute 8%, while increased production across the company’s operations is forecasted to add another 12% to EBITDA growth.

Vedanta has been actively reducing production costs, particularly in its main aluminium and zinc segments, by 35% and 15% respectively over the last six quarters through aggressive cost-cutting strategies.

The conglomerate is also investing in expanding and integrating its capacities. It aims to boost its overall aluminium production from 2.2 million tonnes per year to 3.0 million tonnes in the upcoming quarters. Similarly, its international zinc operations are set to increase production. These twin strategies of maintaining cost efficiency and enhancing production are expected to drive the company towards the $6 billion EBITDA target.

On September 29, 2023, Vedanta Limited, owned by billionaire Anil Agarwal, announced the creation of separate divisions by demerging its underlying companies, particularly those in the metals, power, aluminium, and oil and gas sectors, to realize their potential value.

Following the demerger, Vedanta Ltd shareholders will receive one share in each of the five newly listed companies for every share they hold in Vedanta. Post-demerger, Vedanta Limited will retain the Hindustan Zinc business as well as the display and semiconductor manufacturing divisions.

The demerger is designed to streamline the corporate structure of the group by creating sector-specific independent entities. The board decided to proceed with the demerger because each business operates on a global scale. The aim is to foster a culture of asset ownership and entrepreneurship, allowing each company to determine its own path for growth.

This restructuring will offer global investors, including sovereign wealth funds, retail investors, and strategic investors, the opportunity to invest directly in specialized standalone companies. With publicly traded shares and autonomous management teams, the demerger is also expected to provide each unit with the freedom to pursue their strategic goals more effectively and align more closely with their customers, investment cycles, and target markets, as stated in Vedanta’s announcement regarding the demerger.

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