STRATEGIC PRIORITIES

Focus areas integral to our decision-making

As part of our long-term roadmap, we have five strategic focus areas along which we determine our progress and deliver consistent stakeholder value. They are intricately linked to our material issues, opportunity landscape and risk management protocol, and hence form a key part of our integrated decision-making process. Progress and outlook across each of these focus areas have been summarised below

Continue focus on world-class ESG performance

We operate as a responsible business, focusing on achieving ‘zero harm, zero discharge and zero wastage’, and thus minimising our impact on the environment and society.

We promote social inclusion across our operations to promote inclusive growth.

FY2021 update

  • 8 fatalities occurred in the fiscal year; there are programmes put in place to ensure better investigation quality and leadership oversight to avoid repeats
  • This year we focused on critical risks existing in our business
  • New standards for business partner management introduced along with uniform monitoring system
  • LTIFR reported at 0.55
  • We launched a social performance pilot project at our critical sites
  • 2300+ Nand Ghars established
  • We conducted self -assessment across all BUs to establish the current capacity

Objectives for FY2025

  • Zero fatality, with 2 fatality-free years
  • Stack emissions to be 25% of 2018 levels. All tailing facilities to be audited and actions closed with real-time monitoring
  • All performance standards to be developed, implemented and part of VSAP
  • Employee and community exposure monitoring
  • Mental health programme to be initiated
  • Achieve zero social non-compliances. Become signatories to and participants in VPSHR. Set up an external SP advisory body
  • Achieve 20% reduction in GHG emission intensity from a 2012 baseline
  • Ensure that 40% of all new projects have a carbon rating of 4-star and above
  • 29,000 Nand Ghars to be constructed by 2025
  • Skilling and employment creation for 60,000 youths

Vision

Our safety vision: Everyone goes home safe

Our environment vision: Zero net environmental impact

Our health vision: No impact on employees, BPs and communities due to our operations

Our social performance vision: To become a developer of choice in our areas of operation

Our carbon vision: To substantially decarbonise by 2050

KPIs

  • Fatalities
  • TRIFR
  • No. of Category 5 social incidents
  • GHG emission intensity
  • Number of carbon star rated projects
  • Compliance tracking
  • Source emissions tracking
  • Personal exposure monitoring
  • CSR footprint
  • Gender diversity

Risks

R1 Health, safety and environment (HSE)
R2 Managing relationship with stakeholders
R3 Tailings dam stability
R9 Regulatory and legal risk

Augment our Reserves & Resources (R&R) base

We look at ways to expand our R&R base through targeted and disciplined exploration programmes. Our exploration teams aim to discover mineral and oil deposits in a safe and responsible manner, and to replenish the resources that support our future growth ambitions.

FY2021 update

Zinc India

  • During the year, gross additions of 45 million tonnes were made to R&R prior to depletion of 15 million tonnes
  • Combined R&R estimated at 448 million tonnes, containing 32.9 million tonnes of zinc-lead metal and 914.2 million ounces of silver
  • Overall mine life continues to be more than 25 years

Zinc International

  • Combined mineral resources and ore reserves estimated at 566.4 million tonnes, containing 30.3 million tonnes of metal

Oil & Gas

  • Commencement of seismic acquisition and exploration drilling in OALP blocks spread across Rajasthan, Cambay and the Northeast shall enable to unlock the resource potential
  • Gross proved and probable R&R of 1,229 mmboe

Objectives for FY2022

  • Oil & Gas: Drilling commenced in Rajasthan, Cambay & North East for OALP blocks
  • Oil & Gas: Evaluating opportunities to commence drilling campaign of exploration and appraisal wells to build on the resource portfolio in Rajasthan
  • Metals: Continue to build R&R base and generate new greenfield targets for our commodities/metals

KPIs

  • Total 2P+2C Reserves & Resources in Oil & Gas
  • Total R&R in Zinc India & ZI

Risks

R1 Health, safety and environment (HSE)
R5 Discovery risk
R9 Regulatory and legal risk

Delivering on growth opportunities

We are focused on growing our operations organically by developing brownfield opportunities in our existing portfolio. Our large, well-diversified low-cost and long-life asset portfolio offers us attractive expansion opportunities, which are evaluated based on our return criteria for long-term value creation for all stakeholders.

FY2021 update

Zinc India

  • Total mine development increased by 3% to 95 km in FY2021
  • Environment clearance received for CLZS hydro smelter expansion by 84 kt and Zawar mines expansion by 8 lakh mtpa of ore
  • Back fill plants were commissioned at Zawarmala and Mochia mines

Zinc International

  • Significant ramp up in Gamsberg production with 145 kt zinc MIC in FY2021

Oil & Gas

  • New gas processing terminal construction completed; commissioning underway expected to add ~ 100 mmscfd by Q1 FY2022
  • Capex growth projects update:
    − 74 wells hooked up during FY2021
    − Ravva drilling programme completed; ~11 kboepd of incremental volumes
  • Implementation of enhanced recovery project in Bhagyam and Aishwariya Fields
  • Monetisation of Tight Oil fields through execution of Aishwariya Barmer Hill project

ESL

  • Annual steel production at 1.19 million tonnes, down 4% y-o-y on account of reduced availability of hot metal due to lower production amidst the disruption caused by the pandemic

Objectives for FY2022

Zinc India

  • Further ramp-up of underground mines towards their design capacity of 1.2 mn mtpa
  • Combined paste-fill and dry tailing plant at Rajpura Dariba, which will help increase ore production from 1.2 mtpa to 2 mtpa
  • Setting up 300 ktpa greenfield Zinc smelter at Doswada, Gujarat

Zinc International

  • Skorpion Refinery Conversion – detailed BOQ generated, feasibility report being updated with latest information, target to get Board approval for execution by Q1 FY2022
  • Magnetite Project – Feasibility was completed in Q4 FY2021 0.7 mtpa modular plant has been finalised. Project will be put up for approval for start of execution in Q1 FY2022
  • The feasibility study for Gamsberg Phase 2 was updated. The mine design and the new reserve statement was completed with the Resource to Reserve conversion as scheduled

Oil & Gas

  • Unlock the potential of the exploration portfolio comprising OALP and PSC blocks
  • Infill projects across producing fields to add volume in near term

ESL

  • Embark on the expansion journey from 1.5 mtpa to 3 mtpa
  • To be a steelmaker amongst the top quadrant EBIDTA percentile group

KPIs

  • Revenue
  • ROCE
  • FCF post-capex
  • Growth capex

Risks

R8 Cairn related challenges
R9 Regulatory and legal risk
R12 Major project delivery

Optimise capital allocation and maintain a strong balance sheet

Our focus is on generating strong business cashflows and maintaining stringent capital discipline in investing in profitable high IRR projects. Our aim is to maintain a strong balance sheet through proactive liability management. We also review all investments (organic and acquisitions) based on our stringent capital allocation framework in order to maximise shareholder returns.

FY2021 update

  • Free cash flow (FCF) improvement from ₹ 7,130 crore to ₹ 13,821 crore, up 94% y-o-y
  • Net Debt (ND) increased from ₹ 21,426 crore to ₹ 24,414 crore
  • Net Debt/EBITDA at 0.9x on a consolidated basis
  • Dividend worth ₹ 3,500 crore, ₹ 9.5/share distributed in VEDL

Objectives for FY2022

  • Generate healthy free cash flow from our operations
  • Disciplined capex across projects to generate healthy ROCE
  • Improve credit ratings
  • Reduce working capital

KPIs

  • FCF post-capex
  • Net Debt/EBITDA (Consolidated basis)
  • Interest cover ratio
  • Dividend

Risks

R9 Regulatory and legal risk
R10 Tax related matters
R11 Fluctuation in commodity prices (including oil) and currency exchange rates
R13 Access to capital

Operational excellence

We strive for all-round operational excellence to achieve benchmark performance across our businesses by debottlenecking our assets to enhance production, supported by improved digital and technology solutions. Our efforts are focused on enhancing profitability by optimising our cost and improving realisations through prudent marketing strategies.

FY2021 update

Zinc India

  • Record ore production of 15.5 million tonnes, despite disruptions
    on account of COVID-19
  • Mined metal production of 972 kt and refined zinc-lead production of 930 kt

Zinc International

  • BMM achieved consistent production in FY2021 (58 kt)
  • Gamsberg ramped up significantly with 145 kt production in FY2021 and several best demonstrated performances in ore milled tonnes, mill throughput and plant availability. Production was partly impacted by slope failure in November 2020, but plant continued to operate, backed by healthy ore stockpile
  • Skorpion remained under ‘Care and Maintenance’ following geotechnical instabilities in the open pit

Oil & Gas

  • Average gross operated production of 162 kboepd for FY2021, impacted by COVID-19
  • Liquid handling capacity upgraded by 30%, major facility systems were commissioned
  • Aishwariya Barmer Hill surface facility commissioned; wells being hooked up progressively

Aluminium & Power

  • Record aluminium production at the smelters at 1,969 kt, up
    3% y-o-y
  • Highest ever PFA sales, 28% increase y-o-y
  • New products development in FY2021 such as Aluminium Cylinder Head Alloy, high speed billets, 22 kg and 10 kg ingots
  • Record alumina production from Lanjigarh refinery at 1,841 kt, up 2% y-o-y due to debottlenecking of the refinery
  • Locally sourced bauxite of ~3 MnT during the year (56%); alumina cost of production reduced by ~15% y-o-y at US$235 per tonne despite COVID-19 related challenges impacting the businesses
  • In FY2021, there were no fresh coal imports for our smelters, thereby reducing import dependency by ~3 million tonnes
  • Won Radhikhapur coal block in first tranche of commercial coal block auction
  • FY2021 cost of production for aluminium ~US$1,347 per tonne, down by 20% y-o-y

Steel

  • Increased the EBITDA margin to US$95 per tonne for the year (against US$78 per tonne in FY2020) even at dip in NSR by US$7 per tonne, through better control over costs
  • Decrease in cost by 6 % y-o-y from US$418 per tonne to US$393 per tonne

Copper and Iron Ore

  • At Karnataka, production of saleable ore was 5 million tonnes, 15% higher y-o-y
  • Revenue increased to ₹ 4,528 crore, 31% higher y-o-y mainly due to twofold increase in sales volume at Goa and improved margin at Goa, Karnataka and VAB during the year
  • EBITDA increase to ₹ 1,804 crore compared with ₹ 878 crore in FY2020 was mainly due to improved margin and higher volume at Goa
  • Continued engagement with the government and local communities to restart operations at Goa and Tuticorin

Objectives for FY2022

Zinc India

  • Sustain cost of production at below US$1,000 per tonne through efficient ore hauling, higher volume and grades and higher productivity through ongoing efforts in automation and digitalisation

Zinc International

  • Ramp up Gamsberg to design capacity in H1 FY2022
  • Restart Skorpion post completion of geotechnical studies and feasibility completion of imported zinc oxides

Oil & Gas

  • Increase near term volumes by commissioning the gas processing terminal and completion of surface facilities for Aishwariya Barmer Hill
  • Continue to operate at a low cost-base and generate free cash flow post-capex

Aluminium

  • Production at Lanjigarh refinery of around 1.8-2 million tonnes, with aluminium production at smelters around 2.1-2.2 million tonnes
  • Hot Metal cost of production between between US$1,475- US$1,575 per tonne
  • Improve raw material security locally (bauxite and coal)
  • Increased focus on asset integrity and optimisation, quality, innovation and digitalisation

Copper & Iron ore

  • Continue engagement with government and relevant authorities to enable restart of operations in Goa and Tuticorin
  • Increase our footprint in iron ore by continuing to participate in auctions across the country, including Jharkhand
  • Securing EC for expansion of production capacity of Pig Iron plant by 1.7 ltpa
  • Advocacy for removal of E-auction/trade barrier in Karnataka

Steel

  • Ensuring business continuity with greater focus on reliability centred maintenance
  • Obtain clean Consent to Operate and environmental clearance
  • Raw material securitisation through long - term contracts; approaching FTA countries for coking coal

KPIs

  • EBITDA
  • Adj. EBITDA margin
  • FCF post-capex
  • ROCE

Risks

R1 Health, safety and environment (HSE)
R3 Tailings dam stability
R7 Loss of assets or profit due to natural calamities
R11 Fluctuation in commodity prices (including oil) and currency exchange rates