Vedanta Emphasizes Growth, Green Energy, and Debt Restraint: Statements by Arun Misra
Vedanta Ltd's Q1 Performance: Operational PAT Dips While Reported PAT Declines
In a recent financial report, Vedanta Ltd, the metals and mining conglomerate, revealed a 13% year-on-year (y-o-y) decrease in headline profit after tax (PAT) to ₹4,457 crore. However, this variance between operational PAT and reported PAT is primarily due to non-operational factors such as commodity price fluctuations, one-time adjustments, and financial restructuring effects.
Operational pressures seem to have negatively impacted Vedanta's profitability, as the consolidated PAT for Q1 FY26 declined by 11.7% y-o-y, despite a 5.75% rise in revenue from operations to ₹37,824 crore. The decline in operational profitability was mainly driven by lower commodity prices in Vedanta’s aluminium and zinc segments, resulting in an expected 12-14% quarter-on-quarter (QoQ) drop in EBITDA (earnings before interest, taxes, depreciation, and amortization).
Cost-efficiency measures may have mitigated some profit decline, but the overall operational PAT still fell due to industry-wide commodity price softness. On a positive note, Vedanta's zinc production cost is at a record low of about $1,000 per tonne in Q1, and alumina cost is expected to decline $80-100/t over the next two quarters, with 60% of the reduction coming from an increased captive mix.
The reported PAT is additionally influenced by finance costs, one-time adjustments, and refinancing gains or expenses that are not included in operational PAT measures. For instance, the decline in the reported PAT is due to a one-time, non-operational charge of ₹757 crore related to oil and gas exploration costs under the OALP blocks. Vedanta's funding cost dropped from 10.5 percent to 9.2 percent y-o-y, indicating positive financial management.
Vedanta Ltd is also making strategic moves in the energy sector, adding 950 MW of merchant power, taking total capacity to 3.83 GW, supporting their 2X vision from metals to materials to energy. Power realisations at Meenakshi and Athena are expected to stay strong at ₹5-5.7/unit, supported by PPAs.
Balco, a significant contributor to Vedanta's aluminium margins, is performing well, with margins improving from 27% to over 30%. Despite regulatory scrutiny, particularly in Odisha, Vedanta Ltd is fully compliant. However, Vedanta has no current proposal to acquire additional stake in Balco.
The sale of a 1.6% stake in Hindustan Zinc generated over ₹3,000 crore in sale proceeds, resulting in a gain of ₹1,944 crore from the sale. This move is part of Vedanta's strategy to bring its net debt-to-EBITDA ratio closer to 1x.
Looking ahead, Vedanta is actively exploring new blocks and continuing to invest in technology and management attention for future discoveries in the upstream sector. The company is ramping up alumina production at Lanjigarh, targeting 3.1 mt of alumina and 2.8 mt of metal production by FY26-FY27.
In conclusion, Vedanta's Q1 performance was affected by industry-wide commodity price softness, but the company is taking steps to mitigate these effects and is actively investing in its future growth. The exact line items causing the difference between operational PAT and reported PAT will be detailed in Vedanta’s upcoming quarterly filings.
[1] This information is based on the announcement and the enclosed financial results document provided by Vedanta Ltd, but the precise reconciliation between operational PAT and reported PAT would follow from Vedanta’s detailed quarterly filings and notes, which typically disclose one-time, non-cash, or non-operational items causing such differences.
- Vedanta Ltd's Q1 performance showed a decline in reported PAT, but operational PAT decreased primarily due to non-operational factors.
- The decline in Vedanta's operational profitability was primarily due to lower commodity prices in its aluminium and zinc segments.
- The cost-efficiency measures implemented by Vedanta partially mitigated the profit decline, but the overall operational PAT still fell.
- The reported PAT is affected by finance costs, one-time adjustments, and refinancing gains or expenses not included in operational PAT measures.
- Vedanta is making strategic moves in the energy sector, increasing its merchant power capacity to 3.83 GW.
- Balco, a significant contributor to Vedanta's aluminium margins, is performing well, with margins improving from 27% to over 30%.
- Vedanta is actively exploring new blocks and continues to invest in technology for future discoveries in the upstream sector.
