Dear Stakeholders,
At Vedanta, the pandemic challenged us to think differently and act swiftly, both from the perspective of business continuity and social responsibility. With decisive actions and a strong stakeholder focus, we could mount the imminent challenges and continue to deliver value for everyone.
Even as the pandemic tested our collective mettle, we have many takeaways in our quiver both for business and life that will stay with us. I would like to take this opportunity to thank my fellow Board members, all employees of Vedanta, our supplier partners, our investor fraternity and all other stakeholders, who have stood in solidarity with us as we navigated the COVID crisis.
Rebound, revival and opportunities
Post the pandemic, the world has nearly returned to normalcy in terms of restored economic and business activity, unrestricted mobility of people and re-opening of spaces for work. This has enabled the International Monetary Fund (IMF) to forecast a global growth rate of 4.4% in 2022. However, there are downside risks, which are weighing upon optimism, in the form of the Russia-Ukraine conflict and the COVID-19 outbreak in China. These have caused a ripple effect across the globe including disruptions to already battling supply chains, and in turn, muted manufacturing activity in Europe and the United States.
In India, economic growth bounced back last year, with the National Statistical Office (NSO) pegging GDP growth at a strong 8.9% in its second advance estimates. Government expenditure and domestic spending have shored up the economy well, complemented by a long-term growth focused budget. The initiatives by the government in the recent past, such as the commodity-intensive National Infrastructure Pipeline (NIP) and Production Linked Incentive (PLI) scheme to boost local manufacturing, are also progressing well. This is encouraging, as such bold and scalable programmes are instrumental in realising the vision of a self-reliant India.
On the policy front, the Mines and Minerals (Development and Regulation) Amendment Act, 2021 is also an encouraging move, which calls for private participation in the exploration of key resources such as coal and gold. This paves the way for better utilisation of India’s natural resources potential and in ensuring better trade balance in India’s favour. That said, there is significant space for import substitution of minerals such as Zinc and Oil & Gas, where India freely allows imports for domestic consumption.
In line with India’s Net Zero ambition, we can foresee a strong demand for renewable energy infrastructure and transition to material intensive growth. This will lead to an automatic increase in demand for materials such as aluminium and zinc, which form part of Vedanta’s core portfolio.
Strengthening our performance and position
FY2022 witnessed a notable rebound in the commodity markets with the release of pent-up demand and buoyant prices. The demand was further accelerated by the global energy transition, with OEMs and other players sourcing metals and minerals at scale for deployment in renewable energy infrastructure.
In this scenario, Vedanta reaffirmed its position as a strong natural resources player that contributes to national and industrial growth and to the global priority of carbon neutrality. We saw substantial growth across all our businesses, in terms of throughput and volumes, and in improved financial results. Our strong liquidity position and deleveraging focus peg our debt at a very comfortable level. Reflecting this, both CRISIL and India Ratings upgraded our credit rating to ‘AA’ with a stable outlook.
During the year, our individual businesses received several accolades in recognised forums such as World Finance, SABERA Awards, World HRD Congress and others. At the Group level, we were awarded for our corporate reporting practices and others. Our sustainability efforts were also recognised with improved ratings and rankings in the MSCI and CDP platforms.
In March 2022, we conducted focused interactions with more than 100 investors and analysts. The engagements were very successful as we conveyed to them our unique position to create long-term sustainable shareholder value through our growth plans across commodities, execution capability, disciplined capital allocation, strong dividend distribution policy and commitment to deleveraging.
Prudent capital allocation for strategic growth
In November 2021, we convened to review and unveil our capital allocation policy, which establishes specific guidelines under which we will allocate funds. The policy focusces on rapid but responsible growth and maximising shareholder returns, and is charted under three streams as below:
- Capital expenditure, with a focus on volume augmentation, cost reduction, ESG and moving to value added products; growth projects with a minimum expected IRR of 18%; and sustaining capex on per tonne basis
- Dividend policy, which lays down that a minimum 30% of Attributable Profit after Tax (before exceptional items) of the Company will be distributed as dividends (excluding profits of HZL, dividends of which will pass through in six months). This will be subjected to the Board’s evaluation of various factors, such as robustness of cash flows, economic situation, commodity price cycles, natural calamities, etc. for overall optimal cash management
- Inorganic growth, where we will selectively invest in acquisitions which are accretive to existing businesses or that have synergies with our core businesses
A new mantra to live by: Transforming for Good
In recent years, we can clearly see an accelerated inclusion of environmental, social and governance (ESG) aspects in businesses and investments globally as well as in India. While sustainability has always been a strategic priority for Vedanta, we have now made ESG a central focus in everything that we do.
With the renewed ESG purpose of ‘Transforming for Good’, we are making substantial investments in our business on ESG initiatives. The ESG purpose is taken forward by the three pillars of transforming communities, planet and the workplace. Each pillar further has nine specific aims with quantifiable targets for the medium to long term, helping us map tangible progress every year. Further, the purpose also propagates a culture of ESG within the organisation, across levels and businesses.
Transforming communities
Vedanta has always stood by the communities in and around our areas of operations. We staunchly believe that their trust is our social licence to operate, and it’s our fiduciary duty to operate responsibly and empower them with opportunities and support. The three aims that anchor our community transformation agenda include ‘Responsible business decisions based around community welfare’ ‘Empowering over 2.5 million families with enhanced skillsets’ and ‘Uplifting over 100 million women and children through Education, Nutrition, Healthcare and Welfare’.
Transforming the planet
We are a natural resources company, and everything we do is closely tied to the availability of natural capital. We are also aware that our operations and value chain can leave behind substantial environmental footprint. Towards this end, we are investing in climate action and decarbonisation, circular economy, water stewardship and several environment-focused interventions. The planet transformation agenda is propelled by our aim of ‘Netcarbon neutrality by 2050 or sooner‘ ‘Achieving net water positivity by 2030’ and ‘Innovations for greener business model’.
Transforming the workplace
Our people and their collective skills and abilities give us unparalleled competitive advantage. At Vedanta, our policies and processes are oriented towards inclusivity, equity, meritocracy and satisfaction. Similarly, the health and safety of our people continue to assume the highest priority and we continue to put in world-class safety standards in our operations. ‘Prioritising safety and health of all employees’ and ‘Promote gender parity, diversity and inclusivity’ form key aims of this pillar
We are also mindful of the way our organisation is governed. With strict policies and frameworks in place, we ensure that good governance is practised across the organisation and we are continuously striving to raise the bar. ‘Adhere to global business standards of corporate governance’ is thus the final aim under this pillar.
The future is bright
We are operating in a highly dynamic environment which is flush with opportunities, especially in India. With largescale infrastructure and energy transition plans, efforts towards self-sufficiency, and a booming consumer economy, the avenues that lie ahead of us are endless. At Vedanta, our hard work and strategic focus over the years have helped position us perfectly to make the best of this environment, and our future plans are focused on achieving accelerated growth. More importantly, we are fully equipped to achieve our potential with tenets of responsibility and sustainability at the core. As we put our best foot forward to do the right things and to do things rightly, we expect your continued support.
Best regards,
Anil Agarwal
Chairman