Vedanta Limited (NYSE:VEDL) Q3 2023 Earnings Conference Call October 28, 2022 8:00 AM ET
Company Participants
Sandeep Agrawal – Head, Investor Relations
Sunil Duggal – Chief Executive Officer
Ajay Goel – Acting Chief Financial Officer
Arun Mishra – Chief Executive Officer, Zinc Business
Prachur Sah – Deputy Chief Executive Officer, Cairn Oil & Gas
Conference Call Participants
Indrajit Agarwal – CLSA
Amit Dixit – ICICI Securities
Ritesh Shah – Investec
Pallav Agarwal – Antique Stock
Operator
Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY 2023 Earnings Conference Call of Vedanta Limited. As a reminder, all participant lines will be inline 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. Sandeep Agrawal, Head, Investor Relations at Vedanta Limited. Thank you, and over to you, sir.
Sandeep Agrawal
Thank you, Stephen, and hello, everyone. I’m Sandeep Agrawal. It’s a pleasure to welcome you all to Vedanta’s 2Q FY 2023 earnings call. An audio archive and transcript of this call will be made available on our website. The financial statement, press release, and presentation are already on our website.
From our leadership today, we have with us, Mr. Sunil Duggal, our Group CEO; Mr. Ajay Goel, acting Group CFO. We are also joined by leaders from our key businesses, Mr. Arun Mishra, CEO of Zinc Business; Mr. Prachur Sah – Deputy CEO, Oil & Gas.
Please move today’s entire discussion will be covered by the cautionary statement on slide two of the presentation. We will start with update on operational and financial performance and then we will open the floor for questions-and-answers.
Now without further ado, I would like to hand over the call to Mr. Duggal.
Sunil Duggal
Thank you, Sandeep. Good evening, everyone. Thank you for joining our second quarter earnings call. You all are aware that the global economy has recently been facing certain macroeconomic challenges, netting from Ukraine-Russia war, broadening inflationary pressure, energy shock, food shortage, appreciating dollar and so on.
Most of the central banks have been tightening monetary policies to tame inflation. These near-term macro challenges have weighed down commodity prices during the quarter.
Despite these macro challenges, we have delivered strong operational performance with production growth in key businesses and cost optimization during the quarter. We have achieved consolidated EBITDA of INR8,038 crores. This, along with structural streamlining our working capital investment, helped us to generate a robust free — CapEx free cash flow of INR8,369 crores.
Our center of excellence designed around quality, asset optimization, digital transformation, are helping us to capture full potential of our assets. Our growth in vertical integration projects aimed at reduced market volatility impact are progressing very well.
Now, we have six coal mines, which have 40 million tonnes per annum plus production potential, along with two recently won mines. These mines will be more than sufficient to take care of the entire coal requirement of aluminum business and help us to make it structurally strong.
All these levers will make Vedanta stronger to deliver sustainable and predictable performance across all cycles and create stakeholder value. We remain committed to create value for our shareholders.
In first half of financial year, we have distributed dividend of worth INR 51 per share, which translates into a dividend yield of 15.4%, one of the best amount peers. Vedanta Group is one of the highest contributor to Indian exchequer with INR 37,180 crore contribution in the first half of financial year.
In our pursuit to uplift people’s life, we have reached the milestone of 3,600 Nand Ghars for women and child welfare. Our Balco Medical Center has also signed MOU with Tata Memorial Center to drive excellence in cancer care.
Our ESG program has been progressing very well. I’m happy to share that Vedanta has entered into the exclusive club of top 10 DJSO ranked global metals and mining companies, ranked 6th globally with strong 14 point score improvement.
Under the pillar of transforming the planet, we are on track to achieve 2.5 gigawatt renewal energy target. We have issued EOI for additional 500-megawatt RE procurement. HZL Pantnagar is now our first unit to run entirely on the renewable synergy.
Cairn and iron ore business have achieved third-party assurance for water positivity. We are also making steady progress on waste utilization and R&D for new technologies.
In continuation to our industry-leading people practices on diversity and inclusion, we have identified 120 women leaders who are being developed for future CSO roles. We are launching We Shakti [ph], a programs for women leadership development in third quarter.
Now let us move to the business verticals. Coming first to the Aluminium business. We completed Jharsuguda capacity ramp-up to 1.8 million tonne per annum. Our aluminium production grew by 2% Y-o-Y and 3% quarter-over-quarter. Quarterly COP reduced by 8% to 2,429 per tonne.
We have started Chotia Coal mine operation in September 2022 to rationalize our coal cost. Our linkage coal materialization also improved from 22% to 55% in the quarter. We now have availability, three captive rigs on a daily basis, which move the material or coal from mines to our plant. We continue to focus on volume growth and vertical integration projects to this business sustainable and predictable across all cycles.
Coming to Zinc India. It achieved its best ever second quarter refined metal production of 246kt, up 18% Y-o-Y, driven by improved smelter performance and better mined metal availability.
Silver production grew by 28% Y-o-Y. The operations have overcome quarterly variation and are now sustainably at 1 million tonne per annum plus run rate. The next focus is to achieve 1.2 million tonne per annum run rate in the near future.
Coming to Zinc International. Gamsberg recorded highest ever quarterly MIC production of 55kt with a 43% Y-o-Y increase driven by higher ore production and higher zinc recoveries. Cost of production also improved through potential operational efficiency.
We have successfully gone through learning curve to handle the difficult ore and now operating at about 300kt pa run rate in the current quarter.
With Gamsberg Phase 2 expansion, Zinc International will be among the largest operations globally at 500 ktpa plus size of operations. In oil and gas business, our average gross operated production was 141 boepd. Natural production decline was partially offset by infill wells in MB1 and RDG 2 field. We are focused on delivery of growth projects. We have hooked up eight wells during the quarter. OpEx increased by $0.5 per barrel, Q2, $13.5 per barrel due to increase in polymer prices and maintenance activities.
We continue to engage with government on special excise duty within the framework of PSC and RSC. I’m pleased to inform you that government has extended PSC for our Rajasthan block for another 10 years. To establish shale potential, we have partnered with Haliburton and Schlumberger to build private wells in Barmer.
Our Cambay infill campaign is looking promising. The third well came online in September and has helped increase production from 9,000 to 12,000 barrel partly. The business secured 8 blocks in Discovered Small Fields in round three and one coal bed methane block in special CBM round 2021 across online and offshore regions.
Coming to iron ore. Our Karnataka sales increased by 7% Y-o-Y, though prices remain under pressure, you know because of the export duty. Pig iron production was lower on a Y-o-Y basis due to shutdown of smaller blast furnace. The government of India import duty of iron ore, pig iron among others. This impacted our realization and our margin fell 88% sequentially.
However, we have depleted high-cost inventory quarter two and key cost reduction in quarter three. We successfully started ore production in our Liberia mines in July. We’re planning our first shipment in current quarter. In steel, our saleable production grew 11% Y-o-Y; to, 324 kt with the completion of debottlenecking activities as shared in July.
EBITDA margin was majorly impacted from export duty imposition, driven steel price decline and high-priced coking coal inventory materialization in this quarter. FACOR, ore production grew 43% Y-o-Y due to operational efficiency, ferrochrome production were lower by 42% Y-o-Y on account of shutdown taken for relining of furnace and it’s debottlenecking.
Further growth in lined up with 60 ktpa furnace commissioning by December 2022 at a CapEx of INR 200 crores, which will take the total capacity of FACOR from 75kt to 150kt. In terms of outlook, you may have noted that aluminum, zinc and lead production cuts have been continued in Europe, amidst high energy costs. Energy shortage in some of the Chinese provinces is also impacting metal supply.
We also expect Chinese government stimulus effort to boost commodity demand, while Indian economy is not fully insulated from the global events, it is relatively resilient as reflected by strong industrial production, export competitiveness, tax collection, warranty and nonfood credit growth.
Indian government increased capital expenditure continues to support demand. Indian economy is projected to grow at a robust of 6.8% in 2023, fastest amongst the major global economies. Following the monsoon lull, construction activities have restarted and consumer durable market is vibrant now.
This augurs well for metal demand in India. India being our largest market, with continued strength bodes well for our business performance. We have an outstanding foundation of world-class long-life and low-cost assets producing vital commodities for our global decarbonization transition.
With a rich diversified set portfolio and strong balance sheet, we remain well positioned to benefit from the global mega trends of decarbonization and energy transition and withstand the challenging macroeconomic environment.
With this now, I would like to hand over the microphone to my colleague, and friend CFO, Shri Ajay Goel for the financial performance
Ajay Goel
Thank you, Sunil, and good evening, everyone. The macro operating environment in the quarter was quite mixed with the softening of prices, input inflation and the various fiscal and monetary policy changes. The Indian economy though is far better position compared to global peers. India’s outlook has been optimistic towards domestic consumption, which is evident in several economic indicators.
The commodities indexes are also plateauing and cooling off in many cases. The impact of tightening monetary policies by Central Bank is likely to bring positive results in coming quarters. This quarter, we have pursued various initiatives, which resulted in strong performance despite input inflation and softening pricing on outlook side.
Our businesses have delivered strong quarterly revenue and very robust free cash flow before CapEx, which is driven by working capital initiatives where we have reduced the number of days structurally by 15% quarter-on-quarter and optimized inventory levels. This should continue to benefit us in terms of cash in coming quarters.
Our focus remains on attractive returns to shareholders, with highest ever 15.4% dividend yield. Our leverage steel as best amongst Indian peers at 0.7x is a strong ROCE of 28%. I’m happy to share that we are progressing well on deleveraging commitment at Holdco, which is 4 billion over the next three years.
We have deleveraged the Holdco in the first half of the year by $1.4 billion. The Q2 results are very clearly is the reflection of operating environment. And some of the key financial highlights of the quarter are controlled quarterly revenue of INR 6,037 crores, up 21% Y-o-Y. Quarterly EBITDA of INR 8,038 crores, lower 22% Y-o-Y with strong EBITDA margin of 25%. Free cash flow before CapEx of INR 8,369 crores and you would note that the free cash flow free CapEx for the quarter is more than 10% of EBITDA. So the EBITDA to cash conversion ratio has improved almost 2x of the recent past. ROCE of 28%, which is higher by 2% of last year’s number of 26%. If we continue to maintain healthy cash and cash equivalents of INR26,543 crores with net debt to EBITDA, the leverage ratio of 0.7x maintained at low levels amongst all Indian peers.
And finally, we paid the second interim dividend of INR19.5 per share, amounting to INR7,249 crores in second quarter, which takes total business payout for the first half at INR51 per share that amounts to almost INR19,000 crores, INR18,933 crores, one of the best dividend paying company in India.
We have an income statement in the appendix, page number 30, where you can find more information against each line of profit and loss account. I wish to state that our ETR guidance for the full year will be around 30% now against 28% earlier. This change is driven by movement in profit mix amongst various businesses.
Now I move to EBITDA bridge. So as clear from the EBITDA bridge, quarter-on-quarter, the impact of market driven factors have been partially set off through better volumes across businesses and lowering of cost impact to several measures on cost with also the input prices also tampering in second quarter. We were also benefited from strategic hedging, which helped us to some extent in navigating the tumultuous pricing.
Similarly, if you see the EBITDA bridge Y-o-Y versus last year, the major impact is coming from market-driven factors led by macroeconomic environment and inflation, which was partly offset by increased operational performance and strategic hedging.
Moving on to the page on net debt. Net debt as on September 30th stands at about INR30,144 crores. Again, on net bridge, as I mentioned at the beginning through various initiatives, we have improved working capital, which resulted in strong free cash flows before group CapEx amounting to INR8,369 crores, which enabled us to declare interim dividends in the second quarter. The increase in net debt in Q2 sequentially quarter-on-quarter is due to amount invested in CapEx in the second quarter through borrow decisions.
Moving on to the balance sheet now. Our balance sheet remains resilient, providing both protection and optionality for growth. We achieved net debt to EBITDA, as I mentioned, 0.7x, well within the range of our capital allocation framework and best among Indian peers. Our average maturity maintained at about 3.8 years with average cost of borrowing at about 7.7%. Our credit rating continues to be at AA with a stable outlook, both by India Ratings and CRISIL.
We are investing for future both in terms of value driven growth and positioning the portfolio for longer term demand themes, while remain committed to capital allocation discipline. Our CapEx programs are on track as planned. We have spent INR 0.6 billion in the first half of the year on growth CapEx. On a full year basis, we are revising the growth CapEx guidance for aluminum business to INR 0.6 billion from INR 1 billion, which is in line with cash outlay estimates, all growth programs for aluminum remain on track as planned. With this, full year growth CapEx guidance now stands at INR 1.6 billion.
I have to share that Vedanta was recently awarded the Golden Peacock Global Award 2022, for excellence in corporate governance. Lastly, I’d like to reiterate, we have an outstanding portfolio of long-term assets and expertise to invest in growth in delivering vital commodities for a low carbon future and continue to pay handsome dividend. We will continue to challenge ourselves and deliver goods across various cycles.
With this, I hand over the mic back to operator for Q&A. Thank you.
Question-and-Answer Session
Operator
Thank you very much, sir. [Operator Instructions] The first question is from the line of Indrajit Agarwal from CLSA. Please go ahead.
Indrajit Agarwal
Hi. Good evening. Thank you for the opportunity. I have two questions. First is a two-part question. First, you mentioned about 40 million tonne capacity of coal blocks that you have won so far. So if you can give us some guidance as to what will be the cost of production of these and what kind of savings we can expect from there? Second part is more near term. You have a convert 2,150 to 2,250 aluminum cost of production for the second half, which is about $200 lower than just the current quarter, second quarter. So what would drive this cost reduction? Is it more linked coal availability? And my last question is on the hold coal level. If you can remind us again what is the repayment view for the rest of FY 2023 and also in effect? Thank you. That’s all from my side.
Sunil Duggal
Thank you. I’ll take your first question. So as you rightly said that we have now six coal blocks allotted to us. What Jharsuguda, we at Jamkhani, Radhikapur, Kuraloi, Ghogarpalli for Balco, we attach [indiscernible] and Barra. So as we speak today, the [indiscernible] operator and started feeding coal to Balco. Jamkhani is about to commission and start production any day from now. The all regulatory clearances are in place. All the 90%, 95% land is in our hand now, and we are about to put the shovel in the ground. So it will start feeding the coal to Jharsuguda plant very soon.
But apart from that, you are aware that the Radhikapur and Kuraloi mine, which we had won earlier, there is substantial progress, which has happened, including mine plan approval, moving for forest diversion, environment clearance, negotiations taking place for the land, process taking place for the acquisition of the land. And you also know that in the last quarter, we have won Ghogarpalli mine. Ghogarpalli mine has a mine reserve of around 1.2 billion tonnes and a license capacity of this minus 20 million tonnes. But this line has a capacity even to grow to 30 million tonnes. So Bara is a very recent block, which we have won. It is more like an exploration block. But as the data we have, it has a geological results of around 900 million tonne. So this can easily produce 10 million to 15 million tonnes per annum.
So in total, it will take a very conservative capacity, it is 40 million, 45 million tonnes. But the full capacity from these mines is around 60 million tonnes. So, even if we have a risk that how much long or what risk is there to make these mines operational. We should be able to get the security of 30 million, 35 million tonnes, not very far out from today. And we have made year-wise plan at how the mines are going to open up and how the coal will be fined.
From the year, it will start hitting the road maybe from the current year. There is a progressive reduction, which is going to take place from, say, INR 0.9 per GCV to INR 0.5 per GCV. So there is going to be a substantial reduction in the cost in three years from today. This is against current cost of INR 1.20, INR 1.30, which we have in the current quarter. But we actually work out the power cost at INR 0.5, it comes to somewhere between $325 [ph] or so per tonne against maybe more than $1,000 of the power cost which we had in the last quarter. So there is a very solid plan of how the fuel prices are going to be controlled in the coming years. So what was the second question?
Indrajit Agarwal
On the near-term cost reduction in aluminum dispose?
Sunil Duggal
Yes. So we have given a very conservative guidance, you must have noticed that we had a $240 cost reduction in quarter two. We are looking at a cost reduction of say $300, $350 per tonne in quarter three coming from the various levers. The last quarter only from the power cost, the reduction — of the total reduction $240, $170 was from power. And I also mentioned in the top track that now we have three captive rates available with us. With the three captive rates, which are available with us, we are able to move the substantial quantity of coal to Batubara.
So this will not only help us to get more linkage coal, but also help us to reduce the logistics cost. So because the quarter two, we — we got the option of moving the coal by a road and the — although the linkage improved from 22% to 55%, the reduction of power cost to that extent has not happened, which I think will have a much higher impact this quarter. But apart from that, there are other initiatives of the operational efficiency. But the city coke, city pitch, prices are also going to get controlled. We have certain strategy around how these prices will be brought down.
And of course, the depletion of the high-cost alumina and getting into the cycle of — cycle where we have the alumina available at current prices. So a combination of these three factors, I believe that we should have a cost reduction of $300, $400 in the current quarter.
Ajay Goel
On the third question Indrajit in terms of the HoldCo debt. And maybe what we can do, we can look at the total liabilities, which is a combination of loans, bonds, including the interest under cost. If you look at the current fiscal F23 H1, the total liabilities are about 3 billion and out of which we may have seen the repaid here two dividends and the balance about $1.3 billion at VRL and go refinanced mostly through Indian PSU bankers with the longer-term maturities and the lower cost.
So net-net, in H1 against $3 billion liabilities, almost $1.4 billion, as I mentioned initially, have been deleveraged. In first half, the VRL debt came down from 9.7% to 8.3%. In the second half, the liabilities, including interest cost is about $1 billion, and which is again mostly get refinished. So, overall, in the current fiscal, almost 4-odd billion, a combination of loans, bonds, interest costs and 1.4 billion is deleveraging.
Now F24, again, it is more or less same, 3 billion is liabilities, loans and the bonds plus interest costs. So $4 billion is a maturity in F24. I just wish to make one point that the F22 and F23, most of the VRL debt did also emanate from the loans taken for increasing the stake, which were mostly unsecured and which is getting repaid in the second half. Coming F24, most of maturities are from secured bucket which are easier to refinanced, net-net, $4 billion, $4 billion in both the years and deleveraging of $1.4 billion in the current fiscal.
Indrajit Agarwal
Thank you for your elaborate answers. All the best.
Operator
Thank you. The next question is from the line of Amit Dixit from ICICI Securities. Please go ahead.
Amit Dixit
Yeah. Good evening, everyone, and congratulations for a good set of numbers in very challenging time. I have just a couple of questions. The first one is on essentially the increased CapEx guidance for Balco expansion. If you could throw some light on the key elements because it is very unlike of Vedanta to revise cost of goods, so if you could throw light on the key elements that has led to this increased CapEx in Balco expansion? That’s the first question.
The second one is on the sharp reduction in oil and gas production guidance. Do you think that you would be able to achieve the FY 2024 number that was laid out in the Analyst Meet in March? So these are the two questions I have.
Sunil Duggal
So I’ll try to answer your first question. And for the second question, I’ll also take the help of my colleague and friend, who is there on the call Prachur Sah. So the first question is about the CapEx cost revision of the Balco project. So this is in two, three parts. We – as you would remember that we had got the smelter project approved with the similar capacity of billet production. So there are some CapEx increases there, because of the various events which have taken place and the commodity prices from the time, it has happened. There is some cost increase, it has happened. But majorly, there are two, three things beyond this.
One is that, the primary foundry alloy project, which was not a part of the bigger scheme of things. And we have seen that, what could be the right way or what could be the right product to get the right NEP from the market and the value-added product portfolio should be such that, it should be accepted by the market. So we have planned to add a capacity of 90 ktpa of primary foundry alloys.
The other factor here is that rolled products earlier, the sanction was to increase the capacity from 50 ktpa to 130 ktpa. And now we want this capacity to be 180 ktpa. While we are executing the project of rolled product, we realized that it is good to have this capacity.
So 180 ktpa will be the final capacity for our rolled product, 80 kt for PFA, 420 ktpa or billet. And along with that, the original capacity of 414 smelter capacity. So this will take the total WAAC capacity to more than 100%. So, say, around 105%. So this will — such as the right premium and will also enable us to serve the market in a wider portfolio. And that is why the cost increase on three, four factors which has happened.
Amit Dixit
Oil and gas production
Sunil Duggal
Yes. So oil and gas production, while we have been able to majorly — or actually decline by doing the project on RDG and well intervention and some production, which has also come from Cambay and Ravva. But more to happen.
And as we speak, we have seen some success in the current month. And the next year guidance will be back, depending on the acceleration success, but some advantage may also come from ASP infill. Of course, this is going to take some time before these projects will realize the volume for us. But, Prachur, over to you for a little more detailed explanation.
Prachur Sah
Thank you, Duggal ji. So for — from a production point of view, in Q2, there was a slight impact from production, primarily in our NBFC where we had some impact of a polymer breakthrough where we had to change our operating strategy from a chemical to a mechanical one, but we have overcome that. And we are currently deployed with Schlumberger and Halliburton to recover the recovery from FBA [ph].
And as Duggal ji mentioned, we have had — we have drilled offshore now. And in offshore, we have had success in Cambay offshore where we are currently increase the production from 9,000 to 13,000. And the Ravva drilling campaign, the first well was successful and the second one, which is ongoing or the third one which is ongoing is potentially on the line of success.
So in the short term, these are the sudden labor that will bring the production back up. In fact, in October itself, we have seen an uptick of close to 6,000 in this one. In terms of long term, the exploration does continue. And as you’ve heard, that we have got the extension which will unlock the exploration program, which was kind of held back during the temporary extension period. So that should bring back the robustness on the volume growth as we go into the next year.
Amit Dixit
So in a nutshell, in NBFC, the production should come back, because these temporary factors are now off the table? Is it the correct understanding?
Prachur Sah
Yes. So basically, the decline — the natural decline would be offset by the temporary measures that we are currently taking, which is moving to a more mechanical workover compared to the chemical workoever that was happening there.
Amit Dixit
Okay. Understood. Thanks and all the best.
Sunil Duggal
Thank you.
Operator
The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Ritesh Shah
Hi, sir. Two questions. First question has three parts. Sir, first question broadly on capital allocation in ESG. Sir, first, just some sort of clarification around the new loan investments into semiconductor business versus advanced rate. What is it that we are looking at the company level at the parent level? That’s the first thing.
Secondly, we have incremental announcements on Athena power and Balco upstream expansion. How do we manage this with ESG? That’s the second on capital allocation. And third, Hindustan Zinc, OFS, where are we on the process? That’s three parts to the first question.
And second question is more on debt maturity profile at VRL? Thank you.
Sunil Duggal
Okay. So you asked too many questions in two questions. Anyway, hopefully we reply that. So on semiconductor, I think for that entity, we have already declared that, that does not lie underwear untie [ph] as of now. And I will not be able to comment on that in this call. Although there are hitted negotiations and the discussions are going on as we speak. And this project is going to hit ground as soon as possible. This was one.
The second, you said that…
Ritesh Shah
Sir, can I just — Sir, so semiconductor expansion won’t fall under Vedanta listed entity, is that thing right?
Sunil Duggal
Yes. That’s what we have declared as of now.
Ritesh Shah
Okay. Perfect, sir. Yes. Sorry, sir.
Sunil Duggal
Yes. So as far as Athena power is concerned, I don’t think the carbon footprint are going to increase because of that. We — this will actually — there is a study call, which has written based on the power equation, which will be there for Balco. And one of the options is to feed power to Balco new smelter depending on the power equation we maintained through Athena.
So overall, footprints are not going to increase. But you must have also realized the way we are progressing on renewable power, you may not have heard from any other global player, because 550 megawatt already signed with Centrica, and there is a lot of progress which has happened in the land acquisition and tying up of the transmission network and the ordering of panels.
And we have also given LOI of — EOI of 500-megawatt part, another set of power requirement in all our locations. So this will be more than 1,000 megawatt against our commitment of 2.5 megawatts by 2030. So in two years, we have moved at quite a speed. And apart from that, you must have also heard that some of our units like Pantnagar, is completely on renewable power. We have purchased more than 1 billion units of renewable power in the current year already from various sources.
So our commitment of ESG is above any question. So, we are totally committed, not only on RE, we have made a substantial progress on all the pillars and all the aims, and that is why you must have seen that our DJSI rating has jumped by 14 points. And this is the maximum rating probably you must have seen any jump in any global mining and major mining company globally.
Let’s have full focus on the biomass usage, there are a lot of other ESG projects which are going on. We have started capturing player, which was going in the [indiscernible]. We have started generating 4.4 megawatt power out of that. So there are large number of projects which are going on ESG. We have also committed that in the period from 2020 to 2030, we will plant 7 million trees, 2 million trees we have already planted in the last two years. So against a commitment of 7 million 10-year, 2 million trees are already planted. So there is a lot which is happening in this space.
Ritesh Shah
Sure, sir. Sir, Hindustan Zinc were the status check?
Sunil Duggal
That is for the government to answer, because what you are hearing from the market, I’m also hearing, they are going for a road show, and we are quite excited to sell it into the market for the over as good.
Ajay Goel
On the last point, Ritesh, if I may answer.
Ritesh Shah
I’ll just refine the question on the maturity. Sir, you did indicate in I think one of the initial questions on $3 billion was taken care of in first half. I just wanted to know the sources for that?
And secondly, in FY 2024, you indicated three plus one total $4 billion. Just wanted to get a sense on how are we looking to basically fund this? And if you can tie up with two variables, one is the pledges at Vedanta level pledge or income, government at Vedanta level is already nearly 100%. And secondly, GR to RE [ph], I think you already got shareholder approval, are there any other approvals which are pending? And I presume it could be NCLT or something else? And if NCLT gives the approval, do we still need to go for creditors to get approval for them to actually use those funds towards payouts.
Ajay Goel
Yes. So I’ll try to cover Ritesh, I mean, one of those briefly. So you’re right. So in terms of the H1 current year, we are in mature of 3 billion. The source remains almost 1.6 was dividend. You have seen you paid a dividend, the first in the first quarter and the second in the current quarter. So 1.6 is dividend, 0.2 is a brand fee. That makes 1.8 million, and roughly 1.3 is refinancing.
Now one significant change in terms of refinancing remains that most of refinancings in the current year first half is done through Indian PSU banks, including SBI, which comes, of course, at a cheaper rate and the longer maturities. So, dividend brand fee 1.8 and 1.3 in new loans.
H2, as I mentioned, is rather small. It’s about 1 billion, and we don’t see much change. We are in advanced stage of various discussions with both the Indian PSU bankers and a couple of multinational banks. Finally, yes, 2024 is again almost same number, roughly 3 billion is loans and end of bonds, about 1 billion is cost. Most of our 2024 maturities onwards are coming from the secured bucket, as I mentioned. And hence, refinancing will not be a challenge.
Right now, Ritesh, the plan for deleveraging of 4 billion over three years remains impact and all other priorities on allocation of capital remains sub-surveyed to this goal.
Quickly lastly, commenting on GR to RE conversion. You may have seen approval from BSC, NSC comment from Citi was taken, until last quarter. We also had, as a second last one court convened meeting, so it is NCLT’s monitored meeting of shareholders and that vote for conversion was upheld with a refunding majority of 99.9%. Now the last step released any approval from lenders or secured creators for which we are seeking exemption from NCLT. Once that is done, the one process will get finished.
Ritesh Shah
Okay. That’s quite helpful. That’s quite hypothetically. I’ll jump in the queue.
Arun Mishra
Thank you.
Operator
The next question is from the line of Pallav Agarwal from Antique Stock. Please go ahead.
Pallav Agarwal
Yeah. Good evening sir. So my question was on the alumina cost for this quarter. So if I look at the cost, it shows it’s in excess of $400. So would it make more sense for us to actually buy more external alumina because those prices will be lower than $400 per tonne at least in the third quarter?
Arun Mishra
No, I think the overall alumina cost, we decreased pattern of hot metal decreased by say, around $900 the last quarter. And alumina and Lanjigarh cost was higher, compared to the previous quarter, because the previous quarter, the one-time — the approval was taken by OMC for sale of the additional quantity.
And we had some shutdowns also during that quarter. So that differential is there. But — in the current quarter, you will see the cost reduction coming up in the next quarter, because of the alumina production from Lanjigarh.
Pallav Agarwal
Okay, sir. So — okay. The other thing was, sir, in the copper segment, we’ve reported, I think, a positive EBITDA. So earlier quarters, you were reporting a loss. So what has led to this improvement over there?
Arun Mishra
I think we have done a few structural changes here. One is that the overall — the material, the raw material, we have started purchasing the blisters or some secondary material also. And we have mastered the art of modifying our process through which the impurities are being addressed.
So this has not only helped us to recover good metal value like nickel has started fishing us some value, which gives the credit to the cost, but apart from that, purifying this solution gives us improved the current efficiency that improve the throughput, that improve the quality of the material LME goes up, the overall capacity is ramped up.
So there are many factors which are responsible for that. There are more actions in the pipeline. In the coming quarter, you will see even the improved performance from our Silver plant.
Pallav Agarwal
Okay. Yeah, thank you sir.
Arun Mishra
Thank you.
Operator
Thank you. The next question is from the line of Ashish Kejriwal from Nova Wealth. [ph] Please go ahead.
Unidentified Analyst
Yeah. Hi. Good evening. Thanks for taking my question. Sir, my question is again on aluminum because if I’m looking at aluminum, even in the last quarter, when we mentioned the cost reduction in power, we have not seen that kind of cost reduction.
And going forward also, the kind of guidance which we are giving in the cost reduction in power, that also does not satisfy the earlier comment also.
So, my question is on account of coal cost, when we are talking about that it has reduced from 1.9% per GDV to 1.3% this quarter, we have seen cost reduction of just $170 per tonne. When our captive coal also comes and it’s come to be 0.56, then how come it comes to be around $325? So this math I’m unable to understand.
And second question related to that also if I’m looking at aluminum different cost of production like ingot conversion cost, it is shooting up like $110 to $190. So, other costs are still on a rise.
And thirdly, on premium side also, we are seeing that premiums are also coming down. So, is it ingot premium which is coming down or the value addition part, which we are–? These are three elements on this.
Sunil Duggal
No. Thanks for your question and very relevant question also. So, first, if I could come to the power cost. So, power cost last quarter was around $1,000 plus. So, this was an average cost of coal of 1.7%, which we are hoping to fall down to say 1.4% in the current quarter. And if the overall power cost at 1.73% is say, $1,000 odd, you can work out your number that if the overall coal cost falls down to 0.5, 0.6, or 0.7, what could be the number for the power cost?
Unidentified Analyst
So sir, this quarter, you were talking about 1.73% versus 1.9% in the first quarter or something else?
Sunil Duggal
Yes, yes. The first quarter, the average coal cost was 1.9%; quarter two, it was around 1.7%; and in quarter three, we are hoping to stay around 1.4% or so.
Unidentified Analyst
Okay. And what was the reason for not achieving our earlier guidance when we were talking about that our power cost will come back to fourth quarter level of something like $800 and which we couldn’t do it in the second. Because in last quarter, you clearly mentioned about this, and we are really surprised to see this kind of reduction in power cost.
Sunil Duggal
There are two factors for that. One is that the power demand and the coal stocks at IPPs did not go up and the linkage coal realization was not to the extent we had thought number one.
Number two, even when the linkage core realization improved from 22% to 55%, we had to move a lot of coal through road and which actually hit the cost at — in real sense, this coal would have come by rail, which was the original allotted means of movement of the coal, this will have reduced the coal cost to a larger extent. But now with the three captive rates, which we have mobilized — there is a lot of moment of coal, which is taking place through these rigs apart from what is being allotted by the railway.
So, there is a substantial quantity movement which is happening. But as we speak, there is a — the stocks in the IPPs and the linkage allocation has become much higher. So, a combination of these two things will help us to bring the cost down.
Although the third factor, we have not accounted for when I’m telling you the cost, the Jamkhani coal block operationalization. So depending on how fast we are able to do the stripping and expose the coal. But if we are able to do that, it will further help us to reduce the cost.
Unidentified Analyst
Understood. So sir, just to get clarification from materialization from 22% to 55%, still because of just movement of railway – less movement of railways, we were able to reduce cost to certain extent. So from second to third quarter, when we are talking about reduction, we are assuming that all 55% linkage or whatever that will be rooted through rail or again, there could be surprised going forward?
Sunil Duggal
No, not that the total coal will move through rail. Part of it will still move to road, but it will also depend on the rate allotment and the relaxation, which will be provided by the railways. But a combination of our own brakes and the railways, we feel that we should be able to reduce our coal costs substantially.
Unidentified Analyst
Sure, sure. And sir, next – other question is on premium as well as ingot conversion cost.
Sunil Duggal
Yes. So the other conversion cost – the processing cost is majorly dependent on the CP coke and CT Pitch. And as we speak, we have been able to bring down the CP coke and the CT Pitch prices substantially by 30% or so. This will definitely help us to reduce the processing cost. And on the premium, the demand which has eased out in the high premium geographies and a combination of that, we had to tweak the product portfolio along with the labs and the value-added product. So the combination of the easing out of premium in the market in various geographies and the product portfolio, it has actually impacted our NAV.
Unidentified Analyst
Sure. And sir, lastly, on alumina, whether we are producing at a lower cost than a purchased alumina?
Sunil Duggal
So there was an abrasion in quarter two, which we hope that, it is not going to happen in the coming quarter, which normally does not happen. It also depends the imported aluminum landed cost also depends on which cycle we are. And through that cycle, the landed cost – I mean, there is a lag between the case and the landed and the usage. So the cost is booked on the usage. So with that, I think this is not going to happen. There is always a differential between the imported and the logical cost by, say, around $100, $150. So that differential is going to be maintained in the coming quarters also.
Unidentified Analyst
Sure. Thank you so much. Sir, eagerly waiting for your cost reductions initiatives to actually reflect in the numbers. Thank you and all the best.
Sunil Duggal
That is our biggest motivation as of now.
Sandeep Agrawal
Thank you, Ashish.
Operator
Thank you. Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to Mr. Sandeep Agrawal for closing comments. Over to you, sir.
End of Q&A
Thank you, Steven. And thank you all for taking the time out to join us. I hope we were able to answer most of your questions. In case you have further questions, please feel to reach out us. This concludes today’s call. We look forward to reconnecting you for next quarter earnings call. Thank you, everyone.
Operator
Thank you. Ladies and gentlemen, on behalf of Vedanta Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.
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