Internal accruals to fund $8-bn investment in various verticals: Vedanta

Kolkata, Dec 30: Vedanta’s proposed $8-billion (Rs 560-billion) investment in various verticals will largely be financed through “internal accruals”, with the metals and mining major expecting a four- to five-fold jump in its margins in the next three years. The company plans to scale up its oil and gas, steel, aluminium, copper, and zinc businesses in India.
“Our internal accruals are huge. The financing for the $8-billion investment will be internal, but some loans we can always take. Every year we will be generating $20 billion Ebitda (during the investment period), which should be enough to invest,” Anil Agarwal, chairman of Vedanta Resources, said. Currently, the earnings before interest, tax, depreciation and amortisation (Ebitda) are in the range of $4-5 billion a year, he told reporters during a recent visit to the city.
On a consolidated basis, for the fiscal year ended March 31, 2018, Vedanta had cash reserves (excluding revaluation reserves) of Rs 631.36 billion (approximately $9.03 billion). Its Ebitda registered a 19 per cent jump at Rs 254.70 billion ($3.64 billion) during the year.
With the fresh investment, the company is looking to boost its production capabilities, which will help improve its economies of scale and, hence, Ebitda. The majority of this investment will be spent on the oil and gas business, which operates under group company Cairn Oil & Gas. Currently, it produces around 200,000 barrels every day and Agarwal intends to scale it up to 500,000 barrels in the next two years. Besides, once its new blocks in Assam, Rajasthan, Gujarat, and Tamil Nadu commence production, another half a million barrels can be produced per day.
Vedanta has lined up a gross capex of $2.3 billion in the first phase to increase production in its existing locations of Rajasthan, Andhra Pradesh and Gujarat, while the new blocks will entail an investment of another $ 4-5 billion.