Vedanta : 31 Jul

"Vedanta Limited Q1 FY-23 Earnings Conference

Call"

July 28, 2022

MANAGEMENT: MR. SUNIL DUGGAL - GROUP CHIEF EXECUTIVE

OFFICER, VEDANTA LIMITED

MR. AJAY GOEL - GROUP CFO, VEDANTA LIMITED

MR. ARUN MISRA - CEO, ZINC BUSINESS

MR. PRACHUR SHAH - DEPUTY CEO, OIL & GAS

BUSINESS

MR. RAHUL SHARMA - DEPUTY CEO, ALUMINUM

MR. SANDEP AGRAWAL - HEAD INVESTOR

RELATIONS, VEDANTA LIMITED

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Vedanta Limited

July 28, 2022

Moderator:Ladies and gentlemen good day and welcome to Vedanta Limited Q1 FY23 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 '*' then '0' on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandep Agrawal - Head Investor Relations, Vedanta Limited. Thank you and over to you sir.

Sandep Agrawal: Thank you Nirav and hello everyone. I am Sandep Agrawal. Once again thanks for joining us today to discuss our financial results for first quarter of fiscal year 2023 that ended on June 30th. We have with us today, Mr. Sunil Duggal - our Group CEO, Mr. Ajay Goel - Group CFO. We are also joined by leaders from our key businesses, Mr. Arun Misra - CEO, Zinc Business, Mr. Prachur Shah - Deputy CEO (Oil & Gas) Business and Mr. Rahul Sharma - Deputy CEO, Aluminum.

We will start with update on key highlights of our operational and financial performance and then we will open the floor for questions and answers. Please note today's entire discussion will be covered by the cautionary statement and disclaimer mentioned on page #2 of the presentation. Now without further ado I would like to handover to Mr. Duggal to take us through the presentation. Over to you Mr. Duggal.

Sunil Duggal:Thank you Sandep. Good evening, everyone. Welcome to Vedanta Limited first quarter FY23 earning conference call. Currently global economy is facing volatility amidst high inflation, potential rate hikes by central banks slackening consumer confidence and China's zero COVID policy led lockdowns. This has led to recent softening in commodity prices. However, we also see that China has announced stimulus and has started to ease lockdown restrictions. Amidst ongoing energy crisis especially in Europe, manufacturing costs are higher. This has potential to further suppress, supply and support commodity prices. Crude oil price is expected to remain supported on supply concern. Indian economy's relative resilience is reflected in strong industrial production, export competitiveness and non-food credit growth. Indian government's increased capital expenditure continues to support demand. Although inflation level is above the RBI's tolerance band, RBI expects inflation to fall below 6% level by March '23 quarter.

During the June '22 quarter, we have again demonstrated our ability to execute well through all these challenges. We have started FY23 with best ever first quarter EBITDA as key businesses continued to deliver strong operational and financial performance, underpinned by world-class asset quality and strong business models. We recorded first quarter EBITDA at Rs. 10,741 crores which translates into 7% YOY growth. We have started dynamic commodity hedging for proactive risk management amidst unprecedented price volatility. In July '22 we commenced operation at nickel cobalt Goa plant and Liberia iron ore mine. Our capital allocation and dividend policies are well articulated and designed to create sustainable long-term value. We have invested more

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Vedanta Limited

July 28, 2022

than $14 billion across businesses over the last 10 years. Without raising further capital from equity market, we are investing $3 billion over next 2 years and $2 billion in FY23 alone our growth volume, value added products, backward integration, operational efficiency, and digitization. These projects will make our businesses more sustainable and predictable.

We have one of the best dividends yield amongst peer. We have paid dividend of more than Rs. 65,000 crores over the last 10 years. In Quarter 1 we declared first interim dividend of Rs. 31.5 per share with another interim dividend of 19.5 per share in July '22. This translates into a very attractive dividend yield of 15.4% on YTD basis. We have impeccable track record of meeting all capital market commitments. In line with our commitment to deliver by $4 billion in the next 3 years VRL has deleveraged by $1 billion in Quarter 1 and is on path to further de-lever by $0.5 billion by this month end.

We believe in Atma Nirbhar Bharat, Vedanta Group is one of the highest contributors to national ex-chequer. We have committed to contribute towards uplifting people's life. The transition to a lower carbon world also offers a unique opportunity to grow and remain an attractive investment case for decades to come. Our ESG program has now moved from planning phase to execution phase. You will hear more on progress during the year. In June '22 quarters we achieve net zero commitment. We have completed climate risk assessment both physical and transitional risk. We have also completed inventorization of our supply chain emissions, that is Scope 3 emissions, 2 year earlier than our committed target. India's first battery electric vehicle in underground mine introduced at HZL Zawar mine.

We are continuing industry leading people practices on diversity and inclusion with 29% women in decision-making bodies. Vedanta is also among the few Indian companies that have actively recruited members from transgender community as part of our workforce. We are working to ensure zero harm workplace to learning from mishaps in FY22 and before. In June '22 quarter despite our best effort we are saddened with a loss of life of one business partner employee at Hindustan Zinc. We are taking various initiatives to drive safe work culture including focus on critical risk management to reduce hazardous activities at site. We have launched across businesses audit to ensure best safety practices across the group.

Now if I turn to our business verticals; at our aluminium business in line with Jharsuguda ramp up alumina quarterly production grew by 3% YOY, aluminum production was also up. Quarterly COP was $2653 per ton, impacted by input commodity headwinds, particularly power cost. Zinc India achieved highest ever quarterly refined metal production of 260 KT with 10% YOY growth. Silver production grew by 10% YOY. EBITDA margins supported by higher volumes, better recovery, commodity prices and hedging.

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Vedanta Limited

July 28, 2022

At Zinc International Gamsberg recorded highest quarterly production at 53 KT. It achieved a record annualized MIC production of around 225 KT in June '22. Cost of production also improved despite inflationary cost pressures. In oil and gas business volume was lower by 4% quarter-on-quarter due to natural decline which was partially offset by additional volumes from infill wells and polymer injection in Bhagyam and Aishwarya fields. OPEX increased by $0.60 per barrel QOQ to $13 per barrel, primarily on increase in polymer prices. We're focusing on infill well drilling to maximize near term volumes and arrest natural decline. We expect to commence production from Jaya and Hazari Gaon fields from September '22. Our Shale pilot is also on track for spud in September '22 quarter. From July 1st '22 the government of India has started levying the special additional excite duty on crude oil. We are engaging with the government on this within the framework of PSC and RSC and are quite hopeful on the favorable outcome.

In iron ore our Karnataka business saleable ore production was lower as heavy rain fall impacted ore handling. Pig iron business production was lower on YOY basis in line with plant shutdown at one of the blast furnaces. However, margin improved by 148% QOQ to $159 per ton. We have completed first step towards steel capacity expansion to 3 million ton per annum during the quarter by debottlenecking one of our blast furnaces. This shutdown impacted quarterly hot metal production and consequently a 7% YOY decrease in saleable production. EBITDA margin was majorly impacted from export duty imposition, driven steel prices decline and high coking coal prices. FACOR achieved highest ever ore production since acquisition with 14% YOY growth. Quarterly ferrochrome production grew by 3% to 18 KT. Vedanta is uniquely positioned to deliver sustainable value. In FY23 our key priority will be to deliver volume on committed lines, timely execution of projects and integration of our aluminium business.

We'll focus on production cost reduction and dynamic hedging to proactively manage commodity price, volatility risk. We remain committed to improve margins, increase free cash flow generation, and deleverage. We have an outstanding foundation of world- class long life and low-cost asset producing vital commodities for global decarbonization transition. Our strategy, high quality assets, strong balance sheet and capability position us well for future growth.

With this now I would like to hand over to my colleague CFO, Ajay Goel for financial performance.

Ajay Goel:Thank you and good evening, everyone. As Sunil said, we have an outstanding foundation of high-quality assets along with a strong balance sheet which positions us well for future growth. I am pleased to share that despite inflationary macro environment and fiscal and monetary headwinds we commenced the year with our best ever first quarter financial performance.

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Vedanta Limited

July 28, 2022

Before I walk you through the numbers, I wish to talk about few key accomplishments for first quarter. We achieved highest ever first quarter EBITDA of Rs. 10,741 crores. Increasing shareholder returns, paid total dividend of 11,684 crores which is 31.55 shares in Q1 and second interim dividend of about Rs. 7249 crores which is 19.5 shares in July. This translates to an attractive dividend yield of 15.4%. Proactive risk management through strategic hedging in major commodities to protect margins, the realized hedging gain in Q1 was Rs. 764 crores. We are continuously working towards dynamic liabilities management and has increased our maturities profile to around 4 years and lowered the average borrowing cost to 7.6%.

Lastly, we are progressing well on the path of committed deleveraging. You may have noted the release by our holding company Vedanta Resources Limited of 1.5 billion debt reduction in YTD July '23, that is in the first four months. This is in line with our commitment of 4 billion deleveraging over next 3 years. Operationally Gamsberg and FACOR delivered highest quarterly production while zinc and aluminum volumes continues to be strong. We also successfully acquired Athena power plant having two units of 600 megawatt each which gives long-term energy security and cost certainty.

Now coming to few of the key financial highlights of the quarter; our quarterly group revenue stands at 38,251 crores which is up 36% year-on-year (YOY), highest ever first quarter EBITDA of 10,741 crores, up 7% YOY with a strong EBITDA margin of 32% driven by operational performance despite inflationary cost pressures and moderating commodities prices. PAT, profit after tax stands at 5,592 crores, higher by 6% YOY and that demonstrates a strong financial performance. Our ROCE (Return on capital employed) at about 30%. It is higher by almost 780 basis points from last year's 22%. We also continue to maintain healthy cash and cash equivalents of 34,342 crores which is up 7% quarter-on-quarter. Finally, our net debt at 26,799 crores with net debt to EBITDA the leverage ratio at 0.6X same as last year's and 0.6X put in the perspective is amongst the lowest in Indian peers.

We also have a detailed income statement in the presentation and I want to just share a couple of more updates; depreciation charge for Q1 was at 2,464 crores, 16% up YOY due to higher overall depreciation charges at oil and gas and higher ore volumes at Zinc India. The finance cost for Q1 at 1,206 crores, up 2% due to increase in average borrowings which has been offset by reduced average rate of borrowings. Income from investment in Q1 at 583 crores, up 12% quarter-on-quarter in line with change in the mix of investment and down 20%, majorly on account of mark-to-market. You may have noted that there are two recent repo rate hikes that lead to mark-to-mark accounting but yield to maturity will not change. So, it is temporary. I want to underscore that. The average investment income stood at 4.7% pre-tax for the quarter. The normalized ETR the tax rate for Q1 at 23% which is lower on account of one-time impact of MAT, the minimum alternate tax asset recognition of 505 crores. On full yearly basis which is the

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