Everything you need to know about debt and division
Vedanta: Over time, technology has advanced and a variety of products have been developed to suit customer needs. Metals and minerals are needed to produce all types of finished products. Because these companies mine and extract minerals, they require technology, skilled personnel, and thorough research to determine the best locations and extraction methods.
Raw material demand varies depending on the industry, such as real estate or automobiles. As one of the world’s major economies, China can influence global prices through supply and demand. The rise in raw material prices determines the growth of the company. In this article, we will look at Vedanta, a company operating in the metals and mining industry.
Vedanta Company Overview
Vedanta Limited is a conglomerate that primarily invests in aluminium, zinc-lead-silver, oil and gas, iron ore, steel, copper, power, ferroalloys, nickel, semiconductors and glass. It has significant assets spread across India, South Africa, Namibia and Liberia. Anil Agarwal heads the company previously known as Sesa Goa Pvt Ltd. The company operates across India, South Africa, Namibia, Ireland and Australia.
Circularity and prospects of the metal industry
Steel and other metals are used in the automotive, construction, oil and gas, and domestic housing sectors, as well as in virtually every major industry around the world. For example, the metals and oil and gas sectors are inextricably linked and dependent on each other. This is because they utilize resources created by each other. When one industry struggles, others follow. The same goes for the automotive industry and other important industries in the manufacturing sector. Because they all depend on metals.
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From 2021, India has emerged as the strongest driver of steel demand growth, and according to our forecast, steel demand in India will grow by 8% in 2024 and 2025, driven by continued growth in all steel-using sectors, especially strong steel demand. and is expected to continue to rapidly increase. Increased infrastructure investment. India’s steel demand in 2025 is expected to increase by more than 70 million tons compared to 2020.
debt bubble
Vedanta Resources, the parent company of listed company Vedanta Limited, had liquidity concerns as bond repayment maturities approached. To cover its liabilities, the company raised additional debt from financial institutions and private investment funds, a process known as debt syndication. Earlier, S&P and Moody’s downgraded Vedanta Resources’ ratings due to concerns over debt restructuring, indicating difficulties as market bond prices fell below 80 cents per bond. The company was able to pay off its debt and has not defaulted once since.
Creating value through separation
After debt allocation issues, Vedanta announced the demerger of Vedanta Limited. The merger will create six companies: Vedanta Aluminum, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Materials and Vedanta Ltd. These companies can create value by improving the profit margins of individual companies, which can lead to higher profits. Benefits include returns to shareholders, capital allocation, the debt burden borne by each company and its various businesses, and allowing investors to gain exposure to a single business or industry.
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Vedanta’s Financial and Segment Overview
In FY24, Vedanta recorded an operating revenue of Rs. 1,43,727 crore compared to Rs. It was $1,473.08 billion in FY23, down 2.43% year-on-year. Net profit for 2024 was 130 million won. It is 7.539 trillion won, a 48% decrease compared to the same period last year. 1450.3 billion dollars. In FY24, the majority of revenue comes from zinc, lead and silver (19.56%). Zinc – International approx. 2.49%; Oil and Gas – 12.49%; Aluminum – 33.89%; Copper – 13.82%; iron ore – 6.35%; Power – 4.31%; The remaining 7.06% are other.
Future Plans of Vedanta
In FY25, the company expects to increase domestic bauxite blending at the Sizmali mine, expand the alumina refinery to 5 MTPA, increase power linkage from coal, and operate a captive mine. Expansion of BALCO smelter, increasing rail to road ratio for road transport and increasing VAP mix through completion of BALCO and Jharsuguda expansions.
Hindustan Zinc plans to increase its underground mine capacity to 1.25 MTPA. The Fumer plant produces 33 tonnes of silver, increasing domestic consumption by 40%. Gamsberg Phase 2 is currently being commissioned.
In other businesses, such as oil and gas, the company drills more than 50 landfill wells across onshore and offshore blocks. ESL capacity has been increased to 3.5 MTPA to synchronize four units of Meenakshi power plant. Iron Ore and VAB increases from 3.2 MTPA to 12 MTPA. FACOR volume increases up to 150KPA.
key indicators
conclusion
Towards the end of the article, we learned about Vedanta’s recent efforts to reduce business debt and create value. Commodity prices determine the growth of a given business, which is entirely dependent on the growth of the given economy. Infrastructure development, construction activities, electronics and automobiles are the key drivers.
These developments and high demand could potentially benefit shareholders by increasing volumes. It’s important to understand a company’s business and market before investing. The metals sector is prone to change, so investing requires a careful understanding of the industry. What does the future hold for Vedanta? What is their potential? Let us know your thoughts in the comments section below.
Written by Santosh
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