VEDL - Vedanta Limited (VEDL) Q3 2023 Earnings Call Transcript
Vedanta Limited (VEDL)
Q3 2023 Earnings Conference Call
January 27, 2023 7:00 AM ET
Company Participants
Sandep Agrawal – Group Head, Investor Relations
Sunil Duggal – Group Chief Executive Officer
Ajay Goel – Chief Financial Officer
Arun Misra – Chief Executive Officer-Zinc Business
Rahul Sharma – Deputy Chief Executive Officer-Aluminium Business
Conference Call Participants
Pinakin Parekh – JP Morgan
Prashanth KP Kota – Emkay Global
Ritesh Shah – Investec
Indrajit Agarwal – CLSA
Rahul Jain – Systematix
Alok Deora – Motilal Oswal
Sumant Kumar – Antique Stockbroking Limited
Presentation
Operator
Ladies and gentlemen, good day, and welcome to 3Q FY 2023 Vedanta Limited 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. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sandep Agrawal, Group Head, Investor Relations, Vedanta Limited. Thank you and over to you sir.
Sandep Agrawal
Thank you, Pratham, and hello everyone. I am Sandep Agrawal. On behalf of Vedanta Limited I am delighted to welcome you to our third quarter of this financial year earnings call. The transcript of this call will be made available on our website as well as audio. The financial statements, press release and presentation are already available on the website. Today from our leadership team we have with us Mr. Sunil Duggal, our Group CEO; Mr. Ajay Goel, Group CFO. We are also joined by leaders from a couple of key businesses, Mr. Arun Misra, CEO of Zinc business; and Mr. Rahul Sharma, Deputy CEO Aluminum business. Please note today's entire decision will be covered by the cautionary statement on Slide 2 of the presentation. We will start with update on our operational and financial performance and then we'll open the floor for question-and-answer.
Now, without further ado, I would like to hand over the call to Mr. Duggal.
Sunil Duggal
Thank you, Sandep. Good evening everyone, and welcome to quarter three conference call. During the third quarter, the Indian economy remains strong and resilient on some macroeconomic fundamentals in healthy domestic consumption. Despite rising interest rates, robust growth was witnessed in macroeconomic sectors like housing, automobile, consumer durables. However, the global economy continued to grapple with multiple headwinds like monetary tightening, high inflation, geopolitical instability and volatility in financial markets.
Commodity prices also witnessed sluggishness. In this macro environment, our team has performed commendably. We stood several initiatives, achieved strong operational performance. We delivered good set of financial results despite weaker commodity prices. Our third quarter EBITDA stood at ?7,100 crore. Free cash pre-CapEx for the quarter stood at ?6,500 crore with focus on working capital and cost optimization. In line with our repurposed ESG strategy, we work to uplift the quality of life of communities through various initiatives around drinking water, sanitation, healthcare, community infrastructure, children's wellbeing and education among the rest.
We spend more than ?216 crore in the first nine months of the year and positively touched 3.14 plus million lives. But ESG focus and action have been recognized by several major ESG rating agencies. Vedanta Limited is now ranked six globally among top 10 diversified metal and mining peers in DJSI. It has been inducted into Dow Jones Sustainability Emerging Markets Index. Our MSCI ESG rating has improved from CCC in 2020 to DB now, and Sustainalytics have also improved our ESG risk score by 4.5 points. Across the board improvement in our ESG risk rating is a testimony of our team's diligent effort to become an ESG leader in the industry.
Furthering on our goal to deploy 2.5 gigawatt of around-the-clock renewable energy for our operation by 2030, I'm delighted to share that we have approved plans for another 941 megawatt RE power under group captive RE power development program for our operating across India, including Hindustan Zinc. During the quarter, our aluminum business procured 390 million units of RE power and are conducting biofuel trials as green alternative for ladle preheating and heavy vehicles. We successfully conducted biomass trials at [indiscernible] to explore alternative sources of clean energy.
We have also joined as HZL, Cairn India and Iron Ore Businesses in Net water positive operation. Cairn signed MoU with Gujarat State Forest Department for development of 60 hectares of Mangroves Forest, 50,000 saplings, in coastal area of Surat in our effort to promote biodiversity and reserve environment. We introduced an industry leading EV policy for all of our employees. The policy will lead to increase adoption of EVs amongst employees and drive the mindset change aiding India's green mobility push for its sustainable future. When I come to operations and first on aluminum, our quarterly CoP further reduced by 12% to $2149 per tonne on account operations and buying efficiency. Linkage coal materialization improved to 66%. We have commenced operation at Jamkhani Mines. We continue to focus on volume growth and vertical integration projects to unlock its full potential. Zinc India achieved best of mine and refined metal production in nine months. It’s quarterly refined metal production improved 5% QoQ. With better plant and mine metal availability, it continues to be in the first quartile of global cost curve.
Zinc International operations are now steady at 280 plus KTPA MIC production run rate. It achieved best ever MIC production in nine months. And of course, cost of production excluding TcRc in this quarter decrease 12% vis-à-vis with operational efficiency and higher production volumes.
Gamsberg Phase 2 extension is progressing well. In Oil & Gas business our average gross production increase 3% QoQ to 140 price kboepd as natural production decline was off offset by infill well in Cambay and RDG. We have successfully drilled one exploration well in Ravva and have put that to production adding close to five kboepd.
We commenced first gas and condensate facility in Jaya field, which is OALP. As you know that the government has extended the PSC for 10 years and we have signed the addendum to extension with effect from May, 2020.
In iron ore business our production of saleable ore in Karnataka increased by 32% QoQ. Sale was sluggish due to common imposed duty and export, but now it has picked up. VAB production was up by 66% QoQ to 200kt as all of our furnaces were online for post maintenance shutdown in the previous quarter. However, we saw a quarterly decline in VAB margin owing to price correction.
Liberia operation achieved first ever export shipment in this month. Still one of our blast furnaces was put on maintenance shutdown, resulting in a 6% quarterly production decline. Our quarterly CoP excluding the impact of iron ore mine cost improved on account of lower coking coal cost. However, ESL’s margin were affected by declined steel prices and high cost production, the newly acquired iron ore mine owing to regulatory charges to repair on iron ore production.
In FACOR, nine-month ore production grew 15% YoY. Due to operation efficiency our 60 KTPA furnace is undergoing test run and we are on track to get first production in the month of February, current quarter.
Overall, we have made significant progress across our strategic priorities, creating value for our stakeholders. Our world-class assets have delivered outstanding financial results driven by operational efficiency. I would also like to share that President of Board has approved the sale offers ZI assets to HZL at valuation of $2.98 billion. Consolidation of ZI under HZL will fast track ZI's growth by using HZL's best-in-class expertise in underground mining, melting and metal marketing. HZL's combined R&R would be one billion ton plus, and it would have benefit of improved access to developed market and strong foothold in African subcontinent for expansion. This monetization will provide greater flexibility to Vedanta for future growth projects and manage leverage at group level. This transaction is a win-win transaction and will unlock significant value for both HZL and Vedanta shareholders.
Moving forward, we are optimistic on the commodity market and macro data that we see now is improving. China’s reopening post zero Covid policy, property market stimulus and front loading of infrastructure investments to expand is another positive for metals’ global demand. At the same time, India's economic situation is expected to be better than the rest of the world due to strong domestic consumption. Moreover, this is seasonally a good quarter for commodity demand in India. India being our largest market, it's continued strength offered well for our business performance. With our outstanding portfolio of low-cost assets, multi-commodity credit, strong balance sheet and a commitment to ESG leadership, we are well positioned to deliver value to our shareholders and our communities.
With this now I would like to hand over to our CFO, Mr. Ajay Goel, for financial performance. Over to you Ajay.
Ajay Goel
Yes, thank you. Thank you, Sunil. And good evening everyone. Third quarter witnessed a falling inflation and improving the sentiments, which has driven recent metal outperformance. Indian economy remained buoyant and saw strong growth in metal consuming sectors and India's manufacturing sectors ended 2022 on a strong moat, with the manufacturing PMI rising to two-year high of almost 57.8.
India's inflation is to grow RBI upper tolerance level for the first time in December to 5.7%. We believe that the commodity prices are now under the influence of demand recovery and will stay elevated in calendar 2023 and beyond. This quarter performance witnessed steady production, easing off inflation that helped in a lower operating cost. At the same time, the profit was impacted by further softening of commodity prices.
Numbers for the Q3 are reflection of continuing our various improvement initiatives in terms of enhancing production, lowering operating cost, and focus on free cash flow. I want to share some of the highlights for the current quarter. That being the console quarterly revenue stands at about ?33,691 crores, down 7% quarter-on-quarter impacted by lower LME and brent, the quarterly EBITDA at ?7,100 crores with the margin of 24% supported by easing off input inflation and also strategic hedging.
The highlight – the main highlight for the current quarter remains our profit after tax, PAT, which is at about ?3,092, which increased by 15%, quarter-on-quarter, healthy free cash flow, pre-CapEx ?6,504 crores. And also we continue to maintain strong double-digit ROCE of almost 23%. You heard that we also declared ?12.5 per share, fourth interim dividend. That makes total for the full fiscal at about ?81 per share of YTD and that also makes Vedanta the highest dividend paying company among its peers in India.
Before I move ahead further in Q3 performance, I would like to also highlight that our key metal businesses that is Zinc India, Zinc International and aluminum recorded highest ever MIC and metal production in the last nine months. This demonstrates that our long-term fundamentals remains strong and we will deliver a robust year in terms of operational growth. We have an income statement in appendix, which will find details against each head of profit and loss account.
I’ll now move to EBITDA bridge. When compared the third quarter EBITDA to the second quarter, the largest driver was the lower input inflation and first gain, which was partly offset by lower metal and brent prices. Further, if you look at items that were under our control during the quarter, we did well in terms of operational performance on cost front, which was the outcome of various improvement initiatives running across the businesses and to some extent, strategic hedging in Q3 as well. But if you compare last quarter, the benefit of hedging was lower competitively and therefore, it also impacted the EBITDA for the quarter.
Moving on to next page on net debt bridge. Net debt as on December 31, stand at about ?38,000 crores with net debt-to-EBITDA, the leverage ratio at 0.96, which is maintained at low levels amongst Indian peers. The increase in the debt in the current quarter is a result of spending on various sustaining and growth CapEx at businesses and also the money returned to shareholders that resulted in better debt mix as overall Vedanta Group level. As we are committed, earlier, our net debt-to-EBITDA level remains comfortable and well within the range of our capital allocation framework.
Moving onto the balance sheet, we have built a more harmonious balance sheet with assets and liabilities moving towards better equilibrium and by which I need to say the overall debt at holding company has come down significantly in the current fiscal. We are well positioned to address our current maturities, focusing on driving improvement. We also continue to have solid balance sheet with our net debt-to-EBITDA maintained at comfortable low levels and we finished the quarter with almost $2.8 billion of healthy cash and cash equivalents.
Our average maturity is maintained at about 3.7 years with average cost of borrowings at about 7.7%. Our credit rating continues to be at double-eight with a stable outlook both by India ratings and CRISIL.
We moved a step closure to our commitment of reducing holdco debt by $4 billion over three years. In the first nine months, which is April to December, in the first nine months, we deleveraged holdco by $1.7 billion. Finally, we are confident in our ability to close the year with a strong performance as we have expertise to drive improvements across businesses while successfully weathering macroeconomic uncertainties. We have numerous initiatives that support our strategic priorities and collective needs. These will position us to meet growing demand for net zero transition at the same time returning capital to shareholders.
With this, I now hand over to operator for Q&A. Thank you.
Question-and-Answer Session
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Pinakin Parekh from JP Morgan. Please go ahead.
Pinakin Parekh
Yes. Thank you. Thank you very much sir. Sir, my first question is on the proposed transaction with Hindustan Zinc. Now given that in the past the government apparently did not approve the transaction back in 2012 when it was proposed to buy, what gives us confidence this time that the government representatives will be on board to approve the transaction?
Sunil Duggal
See this transaction is value a critic for both the organization. So I mean the kind of reserve and resources, the – that I have at that point of time and now it has [indiscernible] has been put up as well as already ramped up to almost the full production. Second project is in pipeline, so that means the businesses on track to deliver 600KTPA of volume in the next two years time.
Along with that a lot of exploration success has come and from the time then to now, you can see that the total contained metal in [indiscernible] is more than the funding at this point of time. So it creates a huge synergy and the success of the Hindustan Zinc transitioning to underground, putting up the smelting capacity integrating the operation.
So I think it is a winning combination and with that winning combination, the common games and you can see that ONGC [indiscernible] other common company. Now the government has set up KABIL to acquire the assetabroad which is under the minor ministry today. So they – the government is looking at the global footprint. We believe that this proposal could be exciting for the country, for the government and why should government not support.
Pinakin Parekh
Sure sir. And my last question is that with the expected proceeds I think $2.4 billion upfront and then the remaining over the – over a timeframe what does Vedanta India plan to do with the cash? Would that be entire amount be distributed as dividends or will it look at some kind of acquisitions?
Ajay Goel
Yes, yes, sure. So Pinakin, I mean, you remember our policy allocation of capital – and the entire proceed of $2.4 billion plus $0.5 billion in terms of time will be used and it’ll be guided by your policy and allocation of capital. Now, it may have multiple usages. Example remains using that the money for funding our project in terms of group captive and including the payment of dividend and deleveraging both VEDL and also VRL as a group.
Pinakin Parekh
But any deleveraging at VRL would be done via dividends from Vedanta Limited or can we expect inter-company loans or asset buybacks from Vedanta Resources to Vedanta Limited?
Ajay Goel
Any kind of IC the inter-corporate loan is out of vision and I covered this point also in a couple of the earlier calls. So there is a no ICD plant. And in terms of how this money we can repatriate be it dividend or other means, I think that is something we are working on for nothing. But as I mentioned, allocation of capital policy remains the working team, so it is used – it’ll be used for funding our growth CapEx’s, any acquisitions at the same time, payment of dividend and deleveraging of VEDL or VRL. ICL we have spoken at many front and many times.
Pinakin Parekh
Sure. Understood. Thank you very much, sir.
Sunil Duggal
Thank you.
Operator
Thank you. The next question is from the line of Prashanth KP Kota from Emkay Global. Please go ahead.
Prashanth KP Kota
Hello, sir. Good evening and congratulations sir for the deal with Incident and it’s really reassuring that you’ve committed again that there will be no ICD replica. It’s reassuring. Couple of questions, on Aluminium Business, how do we expect the CoP to progress in Q4 FY2023 as remain the coal linkage is materialized at 65%, 70% and all other sources of Kolar price where they are today. What is the CoP that you can expect in Q4?
Sunil Duggal
So I have colleague in the name of Rahul Sharma, who’s the CEO of Aluminium Business with me. But in the meantime, you can appreciate that we reduce the cost by say around $300 in quarter three compared to quarter two. But we feel that broadly the journey could continue depending on how much of the coal realization linkage, coal realization NPA movement would come. But there are lot of leverage in hand and we believe that we may have good cost reduction. So any guidance, Rahul, you want to give.
Rahul Sharma
Thanks, Mr. Duggal. I think first I would just like to – maybe – just to take your flashback in terms of from in Q2 will, if you recall, we have said that we’ll reduce our cost by $200 and that was H2 guidance. If you see in Q3 itself, we have reduced $280, which is 12% reduction. And that is purely comes from three factor volume for sure is a coal cost, improved official KPI and also the buying efficiency. But coming to the Q4, I think we see that – it’s going to better from here, especially the lever which we see because we are going to have the 100% coal metallization and also the Jamkhani coal mine, which is started in December. We are looking quantity from Jamkhani mine and also softer the commodity price, we see that there is going to be the – further reduction and maybe – maybe around 5% to 7%.
Prashanth KP Kota
Understood, sir. Thank you. And so my second questions on the oil and gas business. Sir, am I missing something with the realization on QonQ or lower because of the lower coal prices? The volumes are same, CoP same, however, EBITDA and revenue are the same despite lower realizations. So is there any mix issue there or what is it that I’m missing?
Sunil Duggal
See, the volumes are up slightly. The volumes are up by 3%. The cost is down by $1 per barrel or so. So there are positive levers around the operation because of which, what is the percentage increase in EBITDA from oil and gas.
Prashanth KP Kota
It’s flat, sir, it’s flat CoP, despite much lower crude prices, how do you guys…
Sunil Duggal
Yes. So you can see that the volume has gone up to 1.45, 1.46 and cost has also reduced.
Prashanth KP Kota
Thank you, sir. Understood, sir. If there’s any other moment, I’ll try to consult with your team. Thanks, sir.
Operator
Thank you. The next question is from the line Ritesh Shah from Investec. Please go ahead.
Ritesh Shah
Yes. Hi sir. Thanks for the opportunity. Sir, couple of questions. First is, I just wanted to have a sense and understanding of the debt maturity profile at Vedanta Resources. Please correct me if I’m wrong, but what I understand is we have an total outgo from $2.5 billion. I think we are trying to tap into PSUs probably look to roll over at Barclays and even potentially looking to top up at Oaktree. So I just wanted to understand how should one look at the cash flows from now till June, if one has to take care of the cash flow requirement at the parent level?
Sunil Duggal
Not sure it is. Yes. So if you look at the– maybe the two quarters, the one is a fourth quarter, the current quarter again of March, the need for the funding at [indiscernible] and with the current dividend of ?12.50 and the renewal amount. So we are fully covered. So the entire cash requirement in terms of source and application are fully in equilibrium for the current quarter. If you look at the Q1 of next fiscal, which is April to June, the total requirement at Vedanta Resources is almost $2.1 billion, in fact $2,050 million to be precise. Now again multiple discussions, you’re right, are going on. I would say three large bucket of to meet the $2.1 billion. First of all, the oak tree upsizing by almost $750 million is one event. Secondly, we are in talks with the various banks based PUC or multinational banks, and at least $0.5 billion we assume we’ll get from there, so $1.2 billion. Reminder amount is a combination of I guess of brand fees, which you pay in the first quarter and dividend. So both for Q4 we are fully locked in. And Q1, we are in the advance stages of closing all of those over next two weeks’ time.
Ritesh Shah
So sir if I just go by the numbers, what you indicated, assuming oak tree at $750 million, brand fee at the $300 million, PUC of $550 million, mark cap at $150 million, it still lives with a gap of nearly $750 million. So is this what you are saying is it could be by way of dividends, and are we pretty much okay that the cash flows from India operations will be able to cover up for this post CapEx?
Ajay Goel
Well, I think those are the ones which are already in the pipeline out, Ritesh. And even the numbers can go hard, but with a combination of $750 million, $0.5 billion and the brand fee, we’ll be covering almost $1.7 billion or so, and that leaves a small number, and even that we can cover, any additional payment of dividend always in option in Q1.
Ritesh Shah
Sure. And sir, I just wanted to understand we were striving for GR2RE, which I think the court has actually put a spanner. How does your thinking change basically when we are looking at a cash flow for the next year specifically, given that is again upwards of $2.5 billion plus of maturity for Vedanta Resources? So I’m just trying to understand your thought process so when it comes to matching the cash flow requirement of the parent?
Ajay Goel
Yes, sure. So the whole proposal, as you remember, we spoke in last also a couple of investors call, the whole movement from GR2RE was a juristic. Knowing that the whole GR concept is basically a pass under new Complete Act, including I would think in very contemporary technical accounting. And companies are doing it even to manage things for those futures. Amount that is paid in the last fiscal, including the two days amount is from the current reserve and profitability. The hearing at NCLT has taken place and all the hearing by both the parties have been finished.
Now the order is reserved and we are expecting the order to come over next four to six weeks’ time. So what we are doing right now is to get anything from the bankers and we have significant portion more than 50% bankers are doing NOC. So we expect that the whole GR2RE closure will be happening within the fourth quarter.
Sunil Duggal
And we are quite hopeful about it.
Ritesh Shah
Perfect. Sir, last question. Sir, are there any covenants that one has to be mindful of? We understand Vedanta India balance sheet is pretty much okay. But when we look at the bond documents we have in past taken leave it to actually basically soften out the covenants. Are there any hard covenants that one needs to be watchable for?
Ajay Goel
I think all the covenants even at the Vedanta Resources are quite I think routine and standard. Nothing that I think we need to worry about.
Ritesh Shah
Sure. That is very helpful, sir. More questions, I’ll join back with you. I wish you good luck. Thank you.
Sunil Duggal
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Indrajit Agarwal from CLSA. Please go ahead.
Indrajit Agarwal
Hi sir, two questions from my side both again on the transaction. First, what would be the tax incidence of this inflow that we will get about $2.98 billion? So what is the kind of cost on the books that we have and if there’s any tax incidents on this?
Ajay Goel
Sure. So again, Indrajit, in terms of taxation, once you look at impact the two aspect, one is the international one. And the entire transaction from the international tax viewpoint is fully tax agnostic. So the $2.98 billion one would receive the full consideration, there is no tax implication. Secondly, from the Indian tax perspective, I think that’s where we are still evaluating certain tax optimization ideas.
Indrajit Agarwal
So even if we upstream this as a dividend, will there be a tax [indiscernible] or that is still under consideration?
Ajay Goel
That we are still working on Indrajit.
Indrajit Agarwal
Sure. My second question is on the first trans estimate of $2.5 billion or $2.4 billion. So what are the milestones or approvals that we are awaiting post we will see that this amount will be upstream to us. What kind of numbers are we looking at? What kind of milestones we are looking?
Ajay Goel
So in terms of approvals, this is an RPT as we know, and that too also material RPT, which is crossing ?1000 crores. So in terms of approvals, it is the audit committee of both the companies, Zinc and Vedanta Limited, which is done. Board of both the company also has clear transaction. Now the third step, of course is sending a postal ballot and getting the approval by the shareholders.
There we need the majority of the minority. The entire process both from the Zinc side and from the Vedanta side will be finished over next six weeks time. So early March, it'll be finished. Thereafter the 2.4 billion state consideration, leaving that deferred consideration can finish pretty quickly over next one month’s time.
Sunil Duggal
We don't have to wait for?
Indrajit Agarwal
Any government approvals either in India or overseas?
Sunil Duggal
No, it's a board matter. So the board has already approved this and post that we have to get the shareholder approval as explained by Ajay.
Indrajit Agarwal
Sure. Thank you so much. That's all for me.
Operator
Thank you. The next question is from the line of Rahul Jain from Systematix. Please go ahead.
Rahul Jain
Yes, hi sir. Thanks for taking my call. So I had a couple of questions firstly on, can you give some update on the expansion of Alumina and Aluminum at it was Lanjigarh and what is the status over there? When can we see additional output coming from there?
Sunil Duggal
So the erection work is in full swing. So the expansion is in two parts. One is 1.5 billion tonne Train I, 1.5 million tonne Train II. So as we speak, the Train I mechanical completion is getting over. And by this quarter end or the early quarter, next quarter the plant will be fired. And we are hopeful that in the next one to two quarter, it should ramp up to the full volume that is Train I. And the second Train, I think by the middle of the next year, the mechanical completion will be over, and then thereafter it will take one quarter or 1.5 quarter to fully ramp up. So by the end of the next year exit the total Alumina refinery up to a capacity of 3 million tonnes will be up and running.
Rahul Jain
Right and then sir on the, the sale of the transaction, the whatever…
Sunil Duggal
The guy who was asking from…
Operator
Rahul Jain from Systematix, please repeat your question, sir?
Rahul Jain
No, I was asking that whatever dividend payment we will get from the sale of conclusion, the transaction and whatever money we will get will be just paid out as dividend?
Ajay Goel
I covered this ballet in the call, so I said, so in terms of this entire money 2.4 plus 0.5 in terms of utilization will be guided by companies policy and allocation of capital, and it can be used for funding our CapEx’s both growth and sustaining at the same time payment of dividend and deleveraging for VEDL and VRL, but substantial portion we intend to use for deleveraging at a good plan.
Rahul Jain
Okay, sir, thank you. Thank you so much.
Ajay Goel
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Ritesh Shah
Hi, sir. Thanks for the opportunity again. Duggal sir question for you, sir how should we look at the incremental capital allocation? I think we have been awaiting clarity specifically on the semiconductor for – if you can provide some color over there. I think secondly, after Athena, we have gobbled another asset in Meenakshi at pretty attractive valuations. So I just trying to get a sense on incrementally on capital allocation. And how are we marrying this decision specifically with the ESG targets that we already stated?
Sunil Duggal
You are asking about the semiconductor business?
Ritesh Shah
Yes, sir.
Sunil Duggal
So semiconductor business as of now is not under ambit of Vedanta. So if any call will be taken. So we'll discuss this, this question at that point of time.
Ritesh Shah
Sir, if I may just if I had, if hypothetically it goes at the parent or at Vedanta India listed entity, how should we look at the financials or if you can, if it's possible, if you can indicate what is the quantum of CapEx, which is required. I assume that the JV, that Foxconn 50-50 and there might be 30-70, so the effective outcome might be a bit low. Can you give us some comfort with some numbers over here? So basically we can take, which we can understand it better.
Sunil Duggal
So Ritesh you have to appreciate that once this transaction is not approved, I am not supposed to discuss this numbers also at this point of time. But you can do your math. Solve the number you are doing in your mind is also right. But it would not require much of a CapEx with the participation of Foxconn and the government subsidy you understand and there is a state subsidy also over 50% subsidy from the center.
Ritesh Shah
Sure.
Sunil Duggal
Beyond this, it will not be possible for me to comment.
Ritesh Shah
No problem. And sir, on power, and secondly, basically Hindustan Zinc incremental basically worthless if at all. So after Athena we have Meenakshi, anything on that side specifically we have seen targets one on ESG?
Sunil Duggal
See, as far as ESG is concerned, we made the 10 commandments declaration to the market that what are we going to do. Now one of that was that 25% of our operation will be decarbonized by 2030. And there are various approvals, project initiatives, various entities are taking. And the plan is that we put 4-gigawatt of the capacity in the pipeline this quarter itself. So when – even when we did the PLF of 4-gigawatt, it will reduce the carbon footprint by 15% from our current level. So against our overall declaration of 25%, if we are able to decarbonize 15% in the next two years time, I think we should pat ourself on the back, number one.
Number two, as far as Athena and Meenakshi is concerned, see the power demand in country, you must have seen last year has gone up by 8% to 10%. And the way the GDP growth is projected and the way the standard of living of the people is going up. I feel that the power growth – the power demand growth is going to be 8% to 10% in the next few years time. So these are idle affects. It is in the best interest of the nation that is idle affects should be put into operation. So from that point of view, our footprints are not increasing from our operations. But this is the initiative I think which is in the best interest of the society and the country. And that is why, we think that what we are doing is the right thing to do.
Ritesh Shah
Sure. And sir, on the Hindustan Zinc OFS, any update on the status?
Sunil Duggal
What we have saw in Hindustan Zinc, Arun, you are party to the roadshow, if you can comment on that.
Arun Misra
So we have – sir, thank you for the question. We have conducted roadshow extensively spanning many countries along with Government of India and a very positive feedback from the potential bias. So with certain government is working out in what form, how many trenches they would do, and let’s wait for that.
Operator
Thank you, Mr. Shah. We request that you return to the question queue for follow-up questions. Thank you. We’ll take the next question from the line of Alok Deora from Motilal Oswal. Please go ahead.
Alok Deora
Good evening, sir. Sir, just question on aluminum growth outlook on the volume side, if you could just highlight how’s demand scenario looking and what kind of volume growth we could look at on the aluminum side?
Sunil Duggal
While the world is very excited about the green metal and the demand is going to grew, but Rahul, what do you have the detailed information from your side?
Rahul Sharma
Yes. No. Thanks for the question. I think aluminum is a strategic metal. And we know that this calendar year, CY 2022, primary demand was 70 million and we see that it is going to be a CAGR of 4% to 5% as a growth, which is likely to happen. And if I talk about India per se, India demand if we see that on the backdrop of 17% YoY growth has been seen in the last nine months. And we see that the demand for the country, especially for India last year was 3.9 million, and this year is going to touch 4.5 million. So we can see that there is a very strong demand, especially India is, so, demand has been increasing electrical and power sector. And another factor also, China is coming back and we see that China is also growing for 4.4% year-on-year growth. Overall demand is quite robust and is strong. And that's what I think as in on the line, same line, we are also looking to expand our capacity from, ?2.3 million to ?2.8 million, then we are taking up to ?3 million.
Alok Deora
Sure. And also sir on realization, how do you see the realization moving now going forward because, the prices started to go up. So just your thoughts on that from near to medium term perspective?
Ajay Goel
Yes, again price point of view, I can only say that, key indicator which drives the growth and I have said few, but the important is that I think China removal of COVID related restriction, that's one. Second is India, which I have already spoken. That is that U.S. inflation dropped by 6.5% in December for vis-à-vis 7.1% in November, U.S. dollar index also dropped, from 115 to 102 and other side, if I see that, the kind of production cut, which is 2.5 million in China and 1 million in Europe. And there is also, if you see the inventory level, which is I think the lowest since 2002 is 1.4 million. So all the indicator, if you see that that is a very strong indicator to have a better level from the current, which maybe has gone to 2200, kind of, I will only say on that point.
Alok Deora
Sure. And just last question so this, you mentioned during the call that, I know after this export ban removal, just the exports are picking up. So is it normalized now or it's it'll take, still take one quarter?
Sunil Duggal
No, we export last quarter you see when the ban was removed and we took a conscious call of slowing down the domestic sales because there we, there is a increase a bit of by around $8 to $10 per tonne. So as we speak we have been able to, move some shipments already and I feel that the from the current month it'll be the dispatch and the sale would come up to the normal level. So that means around 6 million tonnes, 0.6 million tonnes this month itself, it'll take. So that is what the story. Although we still will have some inventory at the end of this month, which will be able to capitalize in the current quarter.
Alok Deora
Got it. Thank you, Sir. That's all from my side. All the best.
Sunil Duggal
Thank you.
Operator
Thank you. The next question is from the line of Sumant Kumar from Antique Stockbroking Limited. Please go ahead.
Sumant Kumar
Good evening sir. I have a small question. Could you please elaborate on the amount of hedging gains? Specifically, we had in this quarter, and if at all some portion we have that can come in Q4?
Ajay Goel
Yes, sure. So the hedging gain in the third quarter is almost ?475 crores. And if you look at maybe for the first nine months, it’s in fact almost touching ?3000 crores, the number is actually the ?2009 crores or ?2005 crores. So almost 3000 crores for the full nine months. And the ?475 crores for third quarter. The quantum of hedge impact is tagged low for the first quarter. And we also can evaluate taking further hedges specifically in the aluminum side. But right now, if you look at mark-to-market for the quantity hedged, the gain is almost still about 50 odd million for the fourth quarter. So the answer to your question is specifically the ?475 crores for third quarter.
Sumant Kumar
Okay, sure sir. Thank you.
Ajay Goel
Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Sandep Agrawal for closing comments. Thank you and over to you, sir.
Sandep Agrawal
Thank you. Thanks everyone.
Operator
Thank you. Ladies and gentlemen, on behalf of Vedanta Limited, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.
For further details see:
Vedanta Limited (VEDL) Q3 2023 Earnings Call Transcript