Sunil Duggal,
Chief Executive Officer
DEAR STAKEHOLDERS
I am happy to report that our intrinsic spirit to do more and serve more helped us navigate the crisis with confidence in FY2021, which truly tested our mettle. In a year abound with changes and challenges, our performance was exemplary by any measure. Further, the year also saw us strategically augment our business model with larger integration and a digital-first approach. The entire Vedanta family deserves a huge round of applause for this achievement.
RESILIENCE MEETS PRUDENCE
I can say with reasonable confidence that we delivered on all major strategic priority areas, with positive outcomes across key performance indicators. We maintained our leadership in most of our businesses and improved on our sustainability metrics. We also supported our people, partners and communities during the testing times of the pandemic and continue to do so. Safety and health continue to be our 24X7 priority. It is a commitment that strengthens our culture, guides our decisions and drives our long-term success.
Cash and cash equivalents
ROCE
Our revenues touched ₹86,863 crore during the year, and we recorded a Net Profit of₹ 15,032 crore. We were also able to achieve industry-leading operating margins. This is a testament to the high-performance culture that we have been able to successfully build over the years. Coupled with a conducive macro environment, we were able to maximise earnings to cash conversion and allocate capital prudently, while pursuing high-return organic growth projects across businesses. Cost optimisation also remained high on our radar to ensure healthy cashflows.
Our liquidity position remains robust with cash and cash equivalents of ₹32,614 crore, with a conservative debt exposure. We have been able to maintain a low Net Debt/EBITDA of 0.9x. Our focus on shareholder value creation remains unwavering, evidenced by a strong ROCE of ~19%.
From a resources standpoint, Vedanta continues to foster long life, structurally low cost and diverse assets with excellent potential, which aligns with our growth ambitions. Together with our strengths in technology, people, and governance, we are ready to cater to the nation’s growing needs for metals and minerals.
A PARAMOUNT FOCUS ON SAFETY
In FY2021, we sharpened our focus on fostering a safe and healthy working environment for our people and partners. However, it is with deep regret that I report the demise of eight of our colleagues. We are doing everything we can to ensure that such incidents do not occur in the future. At Vedanta, we accord paramount importance to occupational safety and employee well-being and continue to nurture a safety culture that results in zero harm.
However, there is always room for improvement, and collective action and behavioural change alone can usher in transformational outcomes. Aligned to this, we are conducting a Group-wide review of permit to work and isolation procedure and are instating a safety alert dashboard to improve implementation of fatality learnings. Cross business safety audits and piloting of critical risk management are other supplementary initiatives supporting this.
SUSTAINABILITY AS AN IMPERATIVE
I’m proud to say that today more than ever, we are striving to contribute better to the world. Our focus on decarbonisation and the commitments we have made in lieu of the same are proactive steps that we are taking in doing our part. Similarly, compared to a baseline from a decade ago, we are much better placed in terms of water savings and emissions. Going forward, we will continue to work on our announced targets and ensure that our operations maintain a greener footprint.
OPERATIONAL REVIEW
FY2021 saw us achieve some of our best quarters in zinc and steel while we sustained low-cost production of aluminium. We also ramped up our natural gas production. Here’s a brief update on each of our businesses:
AluminiumIn FY2021, we achieved record aluminium production of 1,969 kt at our aluminium smelters, and record alumina production from our Lanjigarh facility. We were also able to sustain our low-cost advantage by engaging structural measures to attain US$1,347 per tonne cost of production in FY2021. We have also achieved an EBITDA margin of 27%. While we have optimised our coal and bauxite source mix, we have also continued our journey towards improving our operational efficiencies and debottlenecking our assets for improved capacity utilisation. Similarly, Lanjigarh capacity expansion from 2 mtpa to 5 mtpa has been initiated.
ZincFor Zinc India operations, we completed 1.2 MnT mined metal project activities and sustained production post-transition to a fully underground mining company. We will be actively adding to our R&R in sync with high production, going forward. We are also achieving strong momentum in silver production and aim to be among the top three producers of silver, globally. For Zinc International, our performance ramp-up continues, achieving highest ever production till date at Gamsberg, along with sustained cost reduction.
Oil & GasWe continued delivering on growth projects such as the commissioning of the new gas facility, ramp up of polymer injection, and upgradation of the liquid handing capacity by 30%, major facility systems commissioned. We added 10 new blocks in OLAP II & III, bringing the total to 58 blocks. Early drilling opportunities are being evaluated in Rajasthan, Assam and Cambay regions. Till FY2021, to deliver on the capex project, 256 wells have been drilled and 149 wells hooked up. Our average gross production during the year stood at 162 kboepd; which was mainly impacted by COVID-19.
Iron oreFollowing the upcyle in the metal sector, we were able to swiftly mobilise inventory, and realise value owing to firm market prices. The production in Karnataka has significantly improved at a y-o-y level.
SteelFor our ESL business, FY2021 proved to be the best till date, since acquisition. We achieved a hot metal production of 1,286 kt, with 19% margin. This was led by a significant contribution from our value-added products sales, whose mix in the portfolio has touched 72%.
FACORWith respect to Ferro Alloys Corporation Limited (FACOR), we were able to more than double the margins since acquisition, and considerably improved our total market share. Our current ore production stands at 147 kt.
BUILDING A DIGITAL-FIRST ENTERPRISE
At Vedanta, we have laid a significant focus on leveraging technology and adopting Industry 4.0 practices. Under the ‘Pratham’ initiative, we have introduced several measures, such as smart manufacturing and advance process control in order to improve volumes and optimise asset utilisation. Project Disha, which leverages the wealth of data that the organisation has for decision-making, has started showing its results, owing to advanced analytics capabilities.
At a process level, to achieve Group-level salience and unification, we harmonised our people and HSE functions, which will lead to measurably better outcomes. The digitalisation drive has also led to enhanced automation and control in our supply chain and logistics. This will lead to better cost rationalisations and higher transparency across all aspects of operations.
We have realised that the change needed for digital adoption is more human-led as much as systems-led. It is with this intention that we have introduced Vedanta Spark, which is a global start-up platform that builds the innovation culture and mindset change, strengthening Group-wide digital capabilities.
INNOVATING INTEGRATED APPROACHES
We have augmented our business model by integrating our procurement and marketing functions. This will result in better economies of scale, lower process redundancies, and take us closer to our customers. Today, Vedanta has a single window for the selling of key commodities, enabled by digital platforms. It will also increase cross-selling opportunities and add on to market growth and new product development.
WINNING THE FUTURE
Our focus remains on generating robust cash flows, capital discipline, proactive liability management and maintaining a strong balance sheet. Also, we will continue to review all our strategic decisions, based on the evolving industry realities.
Capitalising on a favourable macro-economic environment, we are committed to helping build a more self-reliant India, and relentlessly contributing to its progress. I thank our esteemed Board, employees, investors, communities and all other stakeholders who have put their precious faith in our vision and capabilities and seek their continued support.
Best regards,
Sunil Duggal
