FINANCE REVIEW

Executive summary:

We had a strong operational and financial performance in FY 2023 amidst the challenges faced due to macroeconomic uncertainty. The Company continues to focus on controllable factors such as resetting cost base through diverse cost optimisation initiatives, disciplined capital investments, working capital initiatives, marketing initiatives & volume with strong control measures to ensure safe operations across businesses within framed government and corporate guidelines.

In FY 2023, we recorded an EBITDA of ₹35,241 crore, 22% lower YoY with strong double digit adjusted EBITDA margin1 of 28%. (FY 2022: ₹45,319 crore, margin 39%). This was mainly due to slip in commodity prices at Aluminium, Lead and Silver and headwind in input commodity prices, partially offset by rupee depreciation, improved sales volume at zinc, aluminium and copper coupled with strategic hedging gains.

Higher sales volumes resulted in increase in EBITDA by ₹641 crore, driven by higher volumes at zinc, aluminium and copper partially offset by reduced sales volume at Oil & Gas and Iron & Steel.

Market factors resulted in decrease in EBITDA by ₹9,512 crore. This was primarily driven by input commodity inflation, decrease in the commodity prices, partly offset by rupee depreciation

Gross debt as on 31 March 2023 was ₹66,182 crore, increase of ₹13,073 crore since 31 March 2022. This was mainly due to the increase of debt at VEDL Standalone and temporary debt at HZL partially offset by reduction of debt at TSPL & ESL and receipt of inter-company loan from VRL.

Net debt as on 31 March 2023 was ₹45,260 crore, increased by ₹24,281 crore since 31 March 2022 (FY 2022: ₹20,979 crore), mainly due to dividend payment and capex outflow partially offset by cash flow from operations and working capital release.

1 Excludes custom smelting at copper business.

Prices, premium/discount

Direct raw material inflation

Foreign exchange fluctuation

Key exchange rates against the US dollar:

Regulatory

Volumes

Cost and marketing (-₹2,618 crore)

Others

Income statement

Revenue

Reported record revenue for the year was ₹1,45,404 crore, higher 11% YoY. This was primarily driven by higher volumes at copper, zinc and aluminium, strategic hedging gains and rupee depreciation, partially offset by slip in commodity prices majorly of aluminium, copper, lead, and silver.

EBITDA and EBITDA Margin

Second highest EBITDA for the year was ₹35,241 crore, 22% lower YoY. This was mainly due to slip in commodity prices at Aluminium, Lead and Silver and headwind in input commodity prices, partially offset by rupee depreciation, improved sales volume at zinc, aluminium, and copper coupled with strategic hedging gains.

We maintained a strong double digit adjusted EBITDA margin of 28% for the year (FY 2022: 39%)

Depreciation and Amortisations

Depreciation for the year was ₹10,555 crore compared to ₹8,895 crore in FY 2022, higher by 19%, due to increase in ore production at Zinc India and higher depletion charge at Oil & Gas business.

Net Interest

The blended cost of borrowings was 7.8% for FY 2023 compared to 7.9% in FY 2022.

Finance cost for FY 2023 was ₹6,225 crore, 30% higher compared to ₹4,797 crore in FY 2022 mainly on account of increase in average borrowings.

Investment income for FY 2023 stood at ₹2,852 crore, 22% higher compared to ₹2,341 crore in FY 2022. This was mainly due to interest received on income tax refund, mark-to market movement and change in investment mix.

Exceptional Items

The exceptional items for FY 2023 were at ₹(217) crore, mainly on account of SAED partly offset by impairment reversal in ESL & WCL.

[for more information, refer note [36] set out in P&L notes of the financial statement on exceptional items]

Taxation

Tax expense for FY 2023 stood at ₹5,770 crore (FY 2022: ₹9,255 crore). The normalised ETR is 30% as compared to 28% in FY 2022 due to change in profit mix.

Attributable profit after tax (before exceptional items)

Attributable PAT before exceptional items was ₹10,521 crore in FY 2023 compared to ₹19,279 in FY 2022.

Earnings per share

Earnings per share before exceptional items for FY 2023 were ₹28.36 per share as compared to ₹52.02 per share in FY 2022.

Dividend

Board has declared total dividend of ₹101.5 per share during the year.

Shareholders' Fund

Total shareholders fund as on 31 March 2023 aggregated to ₹39,423 crore as compared to ₹65,383 crore as of 31 March 2022. This was primarily net profit attributable to equity holders earned during the year partially offset by dividend paid during the year.

Net Fixed Assets

The net fixed assets as on 31 March 2023 were ₹1,15,273 crore. This comprises ₹17,434 crore as capital work-in-progress.

Balance Sheet

Our financial position remains strong with cash and liquid investments of ₹20,922 crore.

The Company follows a Board-approved investment policy and invests in high quality debt instruments with mutual funds, bonds and fixed deposits with banks. The portfolio is rated by CRISIL which has assigned a rating of “Tier I” (meaning highest safety) to our portfolio.

Gross debt as on 31 March 2023 was ₹66,182 crore, an increase of ₹13,073 crore since 31 March 2022. This was mainly due to the increase of debt at VEDL standalone and temporary debt at HZL partially offset by reduction of debt at TSPL & ESL and receipt of inter-company loan from VRL. Gross Debt comprises term debt of c.₹54,543 crore, working capital loan of c.₹2,733 crore and short-term borrowing of c. ₹8,906 crore. The loan in ₹ currency is 90% and balance 10% in foreign currency. Average debt maturity of term debt is ~c. 3.4 years as of 31 March 2023.

CRISIL and India Ratings at AA with negative outlook

Key FY 2023 outcomes