Vedanta Limited
Q3 2021 Earnings Call Transcript

Published: 29 Jan 2021

[Operator:]

Ladies and gentlemen, good day, and welcome to the Vedanta Q3 FY '21 Earnings Declaration Conference Call. As a reminder, all participant lines will be in a listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Arun Kumar, the Chief Financial Officer of Vedanta Limited. Thank you, and over to you, sir.

[Arun Kumar:]

Thank you, operator. Good evening and good morning all the participants in today's call. A very warm welcome to the quarter three earnings call of Vedanta. It's my pleasure to introduce Mr. Varun Kapoor, who has joined us as the IR Head of Vedanta. I now hand over the call to Mr. Kapoor to introduce himself and conduct the rest of the proceedings. Thank you.

[Varun Kapoor:]

Thank you, Arun and good evening everyone. I am Varun Kapoor and I have an overall experience about primarily in oil and gas and research. I've been with the Vedanta Group for about 12 years now, so I look forward to a fruitful engagement with all stakeholders in the coming quarters as the company is well positioned to deliver growth through . So with that, I will request our CEO, Mr. Sunil Duggal to present the results. Over to you Mr. Sunil.

[Sunil Duggal:]

Thank you, Varun. Good evening, ladies and gentlemen and welcome to Vedanta Limited third quarter FY '21 earnings conference call. Before we commence detailed update on Q3 performance, I would like to provide overall broader perspective. India is entering into a golden era with projected growth at 11% to 12% with commensurate higher commodity growth. And sweet spot being a diversified portfolio with production ramping up across our assets. Some of the top achievements of the business in the quarter are, EBITDA at INR 7,695 crores, up 18% Y-o-Y, highest quarterly performance over the last more than two years. Industry leading a better margin of 39%, highest in the past four years. Aluminum sustained lower cost of production and highest EBITDA margin of 28%. Hindustan Zinc, highest ever quarterly ore production of 4 million tonnes, ever lowest underground cost of production in the current year. Hindustan Zinc ranked first in Asia Pacific Dow Jones Sustainability Index in metal and mining sector for the third year in a row. This is best feat achieved by any Indian company. Zinc International, Gamsberg highest ever production of 43 kt. Electrosteel, ever highest hot metal production of 372 kt. Pig iron, ever highest margin of $129 per tonne, a landmark achievement, 2000 Nand Ghar became operational. Quarter four looks more robust with high focus on pulling all levers to drive value for stakeholders and remain poised to deliver ever highest production. March exit could be 2.2 million tonnes and sustaining the cost trajectory. Hindustan Zinc, inching towards 1.2 million tonnes on deck at mined dollar per tonne, silver beating guidance. Gamsberg ramping up to achieve full potential in quarter four. Cairn, new gas facility commissioned. Production ramped up by 15,000 barrels per day. Surface facility and liquid handling facility to add 12,000 barrels per day. Polymer injection ramp up is going on. Iron ore, capitalizing opportunities in iron ore Goa. These are the margin improvements through efficiency and enhancing projects in our largest blast furnace. Electrosteel, maximization of value added product, EBITDA contribution. Second, our newly acquired business, 3x EBITDA contribution in quarter four. I would like to express my deep gratitude to all our employees who have worked hard to deliver yet another strong operating quarter.

[Arun Kumar:]

Yes, thank you, Sunil and Good evening. Good morning, everyone again. On the financials on the page Financial Snapshot, you’ll see, last quarter we talked about a good comeback amidst a tough operating environment. Q3 has been all about sustaining that performance and predictability in both volumes and structural cost reductions, and of course reaping the benefits of the favorable price scenario globally. We are now near normal as are most businesses in India, and globally. Aluminum continued at its hot metal costs around 1300 per tonne. Volumes on the last line, fixed line and that would also started to grow as we start commissioning that port line. Zinc volumes grew and more importantly, development rates increased sharply. moved to higher production levels and nearing its capacity as we speak. Iron ore business making significant contribution including from Goa, steel business doing well and more than tripling the margin at FACOR in the short period post takeover. Last, but not the least, all the oil growth projects are nearing completion in quarter four. Collectively, we delivered about INR 7,700 crores of EBITDA, which is the highest in the last 11 quarters. The next 12 months or the near future as you would have noticed from the business section is all about gradual volume growth sustaining the cost structures and driving organic growth while allocating capital responsibly. This should help weather cycles and reap the benefits of the current upcycle. At INR 7700 crores EBITDA it's up 18% both quarter-on-quarter and year-on-year. Margins at 39% again close to all time highs, ROC at 13% continues to be in healthy double digits. Attributable PAT before exceptional items and tax on dividend at about INR 3000 crores is 51% higher quarter-on-quarter and 35% higher versus last year. No change in any of our guidance around the operating parameters. We believe quarter four will be a volume theme as the guidance numbers would suggest a 10% increase in volumes compared to the last nine months average. As usual we have a detailed income statement in the appendix. However, some key updates on the income statement are as below. Depreciation lower year-on-year, majorly due to the impairment oil and gas in the last quarter of last year. Again as guided earlier, depreciation for Q4 will be marginally higher due to volume ramp ups expected in Zinc and oil. Finance costs slide quarter-on-quarter average boring costs for the quarter are about 7.8% not much change in that. Investment income increased quarter-on-quarter as well as year-on-year primarily due to some one time interest income from recovery or par debtors and tax refunds. Underlying earnings around 6% pretax to continue into next quarter as well broadly in line with guidance. Normalized ETR, effective tax rate is about 27%. This is excluding the tax on dividend compared to the 29% last quarter and that will be sort of the guided number, but that's changed due to the change in the consolidated PBT mix with higher contribution from aluminum and zinc, the ETR is starting to turn down, so 27% can be more like guidance for the year as against the earlier 29%. On the intercompany loan, there are details on the annexure page. The only update is that there has been a reset in the interest rate based on the external arm's length study. And technically some fair value accounting entries have been passed including credit loss estimates, refer to note, notes as part of the Reg 33 release. So two takeaways from an investor point of view is A, there is no more audit qualification. And B, the interest rate has been reset in sort of low double-digit level compared to the current 7% that we had based on the external study, which would be augurs well for Vedanta. Moving on to the EBITDA bridge here on your page. Self explanatory, better volumes, improved costs and we also read the benefits of deflation, depreciating currency and of course, the favorable price. The other bar is just the one half of the oil business revenue of booking of the past exploration that we did in the same quarter of last year. So it's a base here effect. In fact, excluding that number, the EBITDA growth is nearly 50%. On the next page, we have the sequential EBITDA bridge. Again, very simple, it's a continuity of the last quarter. And it's fundamentally banking better LME while continuing to keep the costs well under control, as well as continuing to deliver on the volumes. Moving on to the net debt walk, the reported net debt on December 31 about INR 35,000 crores higher by about INR 8000 crores compared to the last quarter. While we made a positive free cash flow of INR 1550 crores increases due to the outflow of dividend as well as the intercompany loan, which we had already shared the updated number including October month during the last earnings call. So to be clear, there is no change or increase from the $956 million. With tighter plus working capital including collections from par debtors, tax, likely to sign fresh prepays export advance at this time of the year and in general driving excellence through our working capital program management, quarter four should be typically a significant quarter with an expected free cash flow of anywhere from $750 million to $1 billion in the quarter. So the net debt is expected to come down by at least INR 5000 crores. And the net debt to EBITDA back to around 1.0 x is a level that we've held consistently in the last couple of years in fact several years. The YTD growth CapEx number is also about $350 million. Full year will be significantly lower than the guidance of $600 million that we had shared at the time of quarter two results. Again, that demonstrates with tight allocation, though not at the cost of any volume growth, which I had mentioned earlier should be close to 10% volume growth in quarter four versus the first nine months which if one goes by the guided numbers, and no change in that. So that takes us to the last page in the section balance sheet. This summary is that the key focus continues to convert short term to long term maturities, refinancing well in advance for any upcoming maturities not only at Vedanta Limited, but also Vedanta Resources that you would have seen in the quarter that just went by and use the cash to review the growth side. Our focus this quarter will be to continue the engagement with the credit rating agencies to reiterate upwards on the back of robust operations, improved group structure, thanks to the peeping done by the parent, as well as the strong price environment. As you noticed, at least S&P at the parent level have changed the outlook to positive a few days ago. And given that the Indian rating agencies consider the whole group dead in structure, I'm sure we'll have fruitful engagement in this direction in the next couple of months. To sum up, we have delivered a steady and predictable quarter and sustained all operational gains while benefiting from the market prices. This really sets up a good foundation for a strong finish in quarter four. And given the volume growth I talked about, one can easily call the direction of the EBITDA. Not only that, we will have the FY '22 guidance during the quarter four earnings and we do hope to see the momentum continuing into the next fiscal year as well. Thank you. With this, I hand it over to Sunil again for his final wrap up comments.

[Sunil Duggal:]

Thank you, Arun. Before we open the floor for question and answer, I would like to reiterate our strategic priorities that will drive long term value for all stakeholders. One, ethics, health and safety and our social license to operate; two, expanding our reserve and resource base in a sustainable manner; three, delivering the best from our assets and people with a focus on cost leadership; four, continued track record of delivering value-added growth in all of our businesses; five, strict capital allocation and balance sheet focus. Now I declare the floor open for question and answers. Over to the operator.

[Operator:]

Thank you very much. First question is from line of Indrajit Agarwal from CLSA. Please go ahead.

[Indrajit Agarwal:]

Hi, good evening. Thank you for the questions and couple of questions from my side. First on aluminum cost of production, it has improved by about 8% to 9% on a sequential basis. So what is our outlook from here on? How should we look at the elements within the fourth quarter and heading into FY '22?

[Sunil Duggal:]

Thank you for the question. I have my colleague Ajay also on the call, but before that, I mean the cost has gone up slightly and it is a factor of the aluminum LME also, as you know that we bought the alumina and the EPA index drives this cost. And apart from that it depends on the coal costs depending on our linkage materialization and the auction coal. But going forward, we have, as we said in the call, that we have the structural measures in the pipeline where we are securing the bauxite for local bauxite from Orissa, but also as we said that Jamkhani coal block and Radhikapur coal block and we are also participating in the whole auctions, by way of which we feel that we will be able to drive the cost in a structural manner. And we will have the sustainable cost curve going forward, but over to you Ajay, whatever you want to add.

[Ajay Kapur:]

Yes, thank you Mr. Duggal. I think, more or less you've added the main elements. I will just reiterate. Structurally, our power plant operations have also undergone improvements. And we continue to work with the best in class business partners, which was also mentioned by Mr. Duggal in his opening that itself gives us some advantage in the costs. On top of it, our coal cost for the next quarter, most of the auctions have already been purchased in this quarter. So I don't see major headwinds coming on the coal side. Yes, because of higher aluminum, the imported aluminum has gone up. And that's the reason you see that cost increase. We are also working in improving the local bauxite mix. And that on top of, other measures I mentioned on the power plants, I'm confident our cost and EBITDA per ton trajectory should more or less be in the positive direction.

[Indrajit Agarwal:]

Sure. Thanks a lot for the answers. And this sense I got from the call is, we are embarking on most of our mixed phase of growth projects, beta aluminum or zinc. So I understand we will not give guidance specific now. But then next year's project CapEx or growth CapEx is significantly higher than this year.

[Ajay Kapur:]

Yes, let me give you overall color on that. As you see Zinc sector has reached the end of its CapEx cycle. So it's all about delivering and realizing the 1.2 million at Zinc India and Gamsberg really performing to peak as this year was a ramp up to the peak as we speak now. And oil again, all these projects are coming to fruition. So we can expect much next year unless the ASP project is one that needs to be launched, which has huge volume potential. And apart from that aluminum and silver in that, 96 or something that we talked about earlier, delivering volume which is a very small thing. And we've always maintained that the right time for refinery expansion and will come when the EBITDA is good and clear visibility on both sides. So let's move forward to this space in the near future. And apart from that we will give the guidance at the end of the quarter four results. And we've always had a range in terms of CapEx. So we will come up with that number. And the better part is whatever guidance we give the beginning of the year, in the last five years, we've always delivered in a very disciplined way below guidance. Thanks.

[Sunil Duggal:]

But just to add, we are on a drawing board evaluating different opportunities than what could be the near term opportunities especially through digitization, efficiency improvement, APCs, debottlenecking of furnaces, unfinished projects where the marginal CapEx could be spent, maybe the aluminum parts which are, have done. So how we can spend a little CapEx to ramp it up for various opportunities we are trying to evaluate. And based on, the quick IRR or the quick return or maybe the volume addition opportunities next year, we are evaluating that, but as Arun said that we will come back by the end of the quarter and let you know as to how we are going ahead in the next year.

[Indrajit Agarwal:]

Sure, thanks. And lastly on the Videocon acquisition, will it be on our books or on the parenting books? And if so, what kind of investments or new CapEx can we look forward for that?

[Arun Kumar:]

See, the Videocon acquisition right now is okay, done by the parent at the promoter level. So if there is any update or any involvement of any Vedanta Group company in future then we will update at that time. Right now we don't have any updates on it or any information.

[Indrajit Agarwal:]

Sure, thanks a lot and all the best.

[Operator:]

Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.

[Sumangal Nevatia:]

Hi, yes. Good evening everyone. Thanks for that. The first question is on the capital allocation in dividends. This year we've passed on almost one third of the dividend we received from our subsidiary Hindustan Zinc, any thoughts on passing the remaining two thirds? And a follow up to this is, until when do we have the tax shield of the double dividend tax avoidance, in case we choose to defer over to next year?

[Sunil Duggal:]

Okay, so thanks. This quarter has been raised in the earnings call and so I would defer to it as a board decision in terms of how much dividend to declare or not to declare for Vedanta Limited. And, as a reminder, the dividend policy is very comfortable dividend policy, yet at the same time it gives enough flexibility to retain the sums of money as required, but rather in the last five years of trend, the Vedanta Limited has been one of the highest dividend declaring companies in the corporate sector with a dividend yield of around 9% on an average. In terms of the tax, the way it works is that the dividend is -- ability to offset it against the carried forward business losses or deposition is available. And we have adequately used it in a very tax efficient manner for this year. And in future for FY '22 we will certainly update at that point of time, what are the losses available and how we are utilizing them or optimizing on the tax outflows. Thank you.

[Sumangal Nevatia:]

Got it. The next question is, with the technical fundraising and balancing as you shared, we are generating good free cash and our net debt to EBITDA is also reducing. I just wanted to understand the rationale as to why we have raised that around INR 10,000 odd crores from SBI and that you also had to besides strong balance sheet, had to measure Hindustan Zinc stake. So I just wanted to understand the rationale and where have you used the ?

[Sunil Duggal:]

Yes, thanks. Again, I think we did address it in the October earnings call, first quarter earnings call. I think, strong balance sheet is absolutely true, while at the same time, as it is typically called, there will always be certain asset liability mismatches. If you recollect early in the fiscal year, the COVID impact with the down cycle in the metals, as well as inability to access the capital markets, especially there, there was a lot of short term exposure is what led to that long term loans. Those were the conditions negotiated at that point of time. And as the need was there, I doubt if any such conditions would be required. In fact, as I mentioned earlier, we do plan to reduce the net debt by about INR 5000 crores in the coming quarter. I hope that answered your question.

[Sumangal Nevatia:]

All right, I have a few more, but I'll get back in the queue. Thanks and all the best.

[Operator:]

Thank you. The next question is from the line of Amit Dixit from Edelweiss. Please go ahead.

[Amit Dixit:]

Yes, hi, thanks for the opportunity and congratulations for a good set of numbers. I have two questions. The first one if you can clarify a bit more on note number 7 in which there is expected credit loss confirmation, is there a possibility of accepting credit loss, if so, why because we are giving it to our parent this money?

[Arun Kumar:]

Yes, sure. So, the expected credit loss accounting is absolutely a very technical accounting. And something that we also kind of learned it is akin to a general provision created by a bank or an NBFC when you lend to a group of people. So, apparently thousands of transactions have been committed and some financial model and this kind of provision has been necessary. However, as and when the parent keeps repaying it I see that these entities should get reversed. So, and by the way, when we reset the interest rate in January, the entire reserve accounting will go away. So it has no impact on EPS per se. At this point of time other than very small impact or on the profitability, the net momentum interest line for the last six months is about INR 30 crores to INR 40 crores positive, if at all in terms of the additional interest more than offsetting the ECN. So for a moment I'll park it as very technical accounting. There is no real loss as most of you are from the banking and NBFC background you would understand that these are apparently statistical provisions being created.

[Amit Dixit:]

Okay, fair enough. The second question is essentially on the free cash flow guidance that we have given for Q4, given that we are going to have a fairly robust cash flow and our CapEx is also quite well rounded at this point in time. So how do you intend to use this cash flow and possibly for the next year? Will it be towards repaying your debt or we can expect some money back to shareholders?

[Arun Kumar:]

Yes, as I mentioned, as is true with every quarter four, if you look at our pattern, I did mention that we would have a very good chance of generating $750 million to a $1 billion free cash flow just in that quarter, as you also rightly observed, and at the bottom end of the spectrum 750 broadly translates into 5000 crores plus, which is why I mentioned that we would try and repay a minimum of 5000 crores of net debt. And if there are any dividend decisions at that point of time, it will be a board driven decision. And hence, it's very difficult to guide on the dividends fall at this point of time.

[Amit Dixit:]

Great. Thank you and all the best.

[Operator:]

Thank you. The next question is from the line of Vishal Chandak from Emkay Global. Please go ahead.

[Vishal Chandak:]

Yes, thank you and and so, my question was with respect to the change or resetting the interest rate for the loans given to the promoters. So how should we look at, what is the basis of the loan reset and how it was going to happen going forward and what is the current rate of interest?

[Arun Kumar:]

Yes, I think the interest reset has happened through an external study, as well as certified by the auditors as arm's length, which is exactly why their qualification which existed in quarter one and quarter two as now doesn't exist anymore. And as I mentioned earlier, in our earlier presentations you would have noticed 7%, it is now in low double digits. And for commercial reasons we don't want to give the exact number. And there will be again a reset in the fourth quarter as agreed with the auditors. And as you're all quite aware, the comparable loans at the Vedanta Resources that it borrows from third party is already at single digit yields, but then what you have seen in quarter one and quarter two, signifying a huge favorable trend there as well as strength of the balance sheet, and operations starting to reflect across the group. And hence, when we fix that number, during quarter four, it will be lower than the current low double digits that I mentioned. And when we have the exact number, we will certainly share it in the next earnings call.

[Vishal Chandak:]

Sure. And my second question was with respect to the…

[Arun Kumar:]

Maybe, an afterthought, I'd just like to add, we've had a situation like this in the past where Vedanta Limited has only gained in terms of interest earnings. So just a quick reminder that this opportunity earnings was about 1% to what it's earning is more than 10 times what the other available opportunity. Yes, sorry go ahead with your next question.

[Vishal Chandak:]

Yes, sure. That's helpful. So, the second question was with respect to the aluminum cost of production? Now with the hardening of the input costs also do we expect a structural increase, because both coal and alumina are rising, so do we expect a structural increase in the input costs or we plan to offset the same through the methods that you mentioned like optimization, digitalization and the cost of production for aluminum should be flattish going forward? How should we look at it?

[Arun Kumar:]

Now, you can see that we have already said what we wanted to say, but we can reiterate that. I mean, the aluminum cost is a factor of the LME also, because the EPA index and the alumina cost plays a role and as far as the coal is concerned, we are secured for this quarter and H1 also we have secured it quite a lot. But going forward, we have the opportunity to address this cost more structurally and that is why we said that with the new coal blocks which we have in our hand, how to operationalize these blocks as soon as possible and get one or two more blocks, which are in the offing as soon as possible. So this will address our structural coal costs or the power costs going forward. And as Ajay also said that, we are contracting in such a manner that the efficiency and productivity and the heat rate and the auxiliary power consumption is in the scope of our partners and that bring the competence for that. Similarly on the bauxite and the aluminum costs, we said that we are eyeing and looking at increasing the capacity of Lanjigarh plant from 2 million to 5 million tonnes and sourcing the local bauxite. And you must have also seen that in MMDR amendment also, the government said that they want to tag bauxite and coal option together and probably they will be, they may be coming for this option in the near future.

[Vishal Chandak:]

Sure, if I mean squeezing just one last question regarding the Radhikapur coal block, so what are the expected timelines for commissioning this block?

[Sunil Duggal:]

Ajay?

[Ajay Kapur:]

Yes, Vishal if I can come in and thanks for that very detailed, I think I'll only add one more thing on the cost side. Most of the costs, especially the biggest driver is the imported as alumina, which is linked to LME. And generally when LME goes up, it goes, the alumina cost goes up. But we are also restructuring the local operations and by increasing domestic alumina, domestic bauxite, we have upside, and then it also reflects in better margin. So I'll pause on that. On Radhikapur, government has allowed us 60 months time. But you know Vedanta, we will obviously try and expedite. I will not be in a position to give you exact timeline, but I can tell you we will do far better than 60 months and as I speak to you in active evaluation of various options about how to bring it in the fastest time. If you have seen in our guidance, we have already mentioned that as one of the initiatives to bring the cost down.

[Vishal Chandak:]

Sure. Thank you very much sir.

[Operator:]

Thank you. We'll take the last question from the line of Ritesh Shah from Investec. Please go ahead.

[Ritesh Shah:]

Hi, sir. Thanks for the opportunity and congratulations for a great set of numbers. I have a couple of questions. Firstly, sir, you indicated that we might not give CapEx guidance, but I just wanted to have the thoughts on one and understand when fertilizer plant, second is the job . And thirdly, you did touch up on Videocon answers on that being at the parent level what I understand in fact technologies, but would it have any bearing on the listed entity - if at all? Hello, I'm audible now.

[Sunil Duggal:]

Yes, you’re audible.

[Ritesh Shah:]

Yes, I had a couple of questions. Sorry for that. First was on capital allocation, I understand you might not give FX numbers, while I just wanted to have some thought process on the fertilizer plant, specifically for Hindustan Zinc with your smelter. And lastly, you did indicate about Videocon assets what I understand is that , but would it have any bearing on the listed entity going forward? That's the first question.

[Sunil Duggal:]

So Arun, you can take that question. But broadly, I would say that, as far as the Gujarat smelter and the fertilizer project, we are in the process of getting clearances and doing the feasibility and as we will complete our feasibility and other primary factors, we will come back and report to you that how and when we are going about this. But Arun on Videocon.

[Arun Kumar:]

Yes, thanks. So I think on Videocon if every Vedanta Group of Companies are coming into play or have come into play, then we will certainly announce it ASAP. But at this point of time, I have no information or update on that one. It is outside of the Vedanta Group.

[Ritesh Shah:]

Great. Sir my second question is on policy side. Duggal sir, hello, I’m audible?

[Sunil Duggal:]

Go ahead. Yes.

[Ritesh Shah:]

Yes. My second question is for Duggal Sir. Any update on Hindustan Zinc arbitration? It has been lingering for quite some time and any update on PSC? That's the second question and I have one more question for Arun sir. Thank you.

[Sunil Duggal:]

So on the Hindustan Zinc case, I think the Supreme Court vacated the stay in the last hearing and I think the, in the next few days I think the next week itself, the final hearing is coming for that. And let us wait and let us see that in all probability the government, they release and say to the government that they can disinvest their balance shares. But it is for the government to decide which way they want to go. As far as ESG is concerned, as I said in my commentary that, the arbitrator has given a stay on the coercive action, and they have directed the government that they should not insist on the recovery of the dues, because these are not established as yet. Secondly, on the 10% profit petroleum, we have a very strong case. Yesterday and today, the hearing was there, the detailed hearing has taken place, and some data court has asked probably Monday also, again the hearing is there. I believe the hearing has gone and the way our case is because you know the reason why we feel that 10% additional profit petroleum is not tabled. In the earlier PSC it was written that if we produce gas, we will get the PSC at the same terms. The condition which we have complied and we have been producing gas and as we speak, I also said that we are ramping up our gas volume and there are near term opportunities also for -- but the government stand is that they have revised the policy, but it is more like a retrospective revision of the policy. The court will have to evaluate what is the merit, what they are saying, but we feel that we have a strong case.

[Ritesh Shah:]

That's very useful sir, very detailed. Sir just on the arbitration thing, you indicated that disinvest the balance shares, does this mean that there's no Metals Corporation act as a hurdle given we have the full control of the assets as per the shareholders agreement?

[Sunil Duggal:]

That stay is vacated. No, and the government is going for the final hearing.

[Ritesh Shah:]

Perfect. And the last question for Arun sir. Sir, this was one of the questions earlier, this is regarding the pledge on Hindustan Zinc shares, but even one looks at Vedanta’s Holdings 50% is encumbered and 5% is pledged and the company has a solid cash flow profile, you indicated about net debt reduction. How should one look at both the pledge at Hindustan Zinc level as well as a Vedanta level? I am not sure, but if you can couple this with how we are looking to fund or how promoters are looking to fund the voluntary open offer? Is it like pledges are the way out or how should one understand this entire tangle? Thank you so much.

[Arun Kumar:]

Yes, sorry the voice was breaking in and out. I think you will need to repeat the question.

[Ritesh Shah:]

I’ll just repeat it. Sorry for that. Sir my question is, if one looks at Vedanta’s holding 50% is encumbered 5% is pledged and also there was a prior question about pledges at Hindustan Zinc level. Given that is a solid cash flow generation, how should one look at these variables both at Vedanta level as well as Hindustan Zinc level?

[Arun Kumar:]

Okay, I think maybe break it into two parts. One, to easily get the Hindustan Zinc pledge out of the way. At a point of time, a deal was agreed with a set of banks. Right? That situation doesn't exist today, as you all have rightly observed from the set of numbers not only what we've delivered, but what quarter four will be looking like and perhaps FY '22 is looking like. So they really want you to think about how in future, one can repay or substitute that borrowing and release the pledge or release the perception as to why we pledged at that point of time. And I think the future augurs very well for that situation, so that is independent. As far as the promoters activities in terms of voluntary open offer and the 5% pledge, we're not in a position to comment on this earnings call which we should I think restrict to the Vedanta Limited and its performance, but in a broader way, if one observed during the bond road shows that we did for the Vedanta Resources bond that we issued in December. Fundamentally, we're trying to create a two-year runway of getting all the debts out of the way, as well as we mentioned that part of it is being refinanced and part of it is also going to be organically delevered, simply on the strength of the huge cash flows that Vedanta Limited can generate at these price levels, especially with the end of the CapEx cycle in at least two of the key sectors and the LME and price levels and the 10% volume growth I talked about in Q4 versus the nine months that went by. So there are lots of tailwinds for Vedanta I would say. And I know there were questions on the CapEx guidance, et cetera. But at the same time, if you look at the trend, including sustaining CapEx, we've never exceeded $1 billion dollars good year or bad year. And it will take some effort to go beyond that, but we will come with the right set of guidance numbers at that time. So bottom line is, a lot of cash generation will help in organic delivery at Vedanta Resources level. So on the bit, I will avoid any comments. And as an afterthought, I also want to add a sentence on your earlier question on Videocon. Again, one thing purely from an analysis perspective, I think somewhere that the asset is coming into the group is something for us to all cheer about, simply because it's got a very valuable oil and gas portfolio, including the rubber effect of which Vedanta Limited itself holds about 22% and Videocon used to hold about 25% of steel bars. So somewhere that offers a fantastic opportunity to consolidate that very, very promising asset. So that's just an afterthought, but at the same time right now Vedanta Limited isn't involved. If at all, we will certainly announce and let you know. Thank you. I hope we answered your question.

[Operator:]

Thank you. Ladies and gentlemen, that was the last question. And I'll hand the conference over to Mr. Varun Kapoor for closing comments. Thank you, and over to you, sir.

[Varun Kapoor:]

Thank you very much operator. To conclude, again thank you all of you for taking the time to join us this evening. In case you have any further questions, do not hesitate to contact myself or my team here and we would like to help. So I just wish everybody a very good evening and I'll pass it back to the operator to close.

[Operator:]

Thank you very much. Ladies and gentlemen, on behalf of Vedanta Limited, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.