vedanta ltd. credit report...vedanta ltd. average of top 6 competitors source -bloomberg working...

Company Snapshot

Business Description

Corporate Governance

Industry Overview & Competitive Analysis

Financial Analysis

Capital Structure

Liquidity Analysis

Investment Summary

Investment Recommendation

AGENDA

COMPANY SNAPSHOT

1954

2007

2011

2015

Evolution of Vedanta Ltd.

•

•

•

Key Highlights Financials

Company Snapshot




Financial Analysis

Capital Structure

Liquidity Analysis

Investment Summary


AGENDA

ALUMINIUM

• BALCO

• Jharsuguda

• Lanjigarg

ZINC

• HZL

• Zinc International

• Gamsberg

OIL & GAS

• CAIRN

• Raageshwari Deep Gas

• Bhagyam & Aishwariya

COPPER

• Tuticorin

• Mt Lyell (Australia)

IRON ORE

• Codli Goa

• Narrain(Karnataka)

POWER

• Talwandi Sabo Power Plant

• Jharsuguda

KEY BUSINESS AREAS

ALUMINIUM

28%

ZINC28%

COPPER24%

IRON ORE7%

OIL & GAS4%

POWER7%

OTHERS2%

SECTOR WISE REVENUE CONTRIBUTION

BUSINESS DESCRIPTION

BUSINESS MODEL

.

Exploration of Mines

1

Cutting EdgeTechnology

3

Economiesof Scale

4

5

Efficient SupplyChain

DEMANDSUPPLY

CommunityDevelopment 2

• Demand

increased by 3%

• Price Increased by

6.2%

• Industries: Rods,

billets, foundry

• Countries:

Europe, North &

South America

• Estimated Prod. in

FY2017-18 is 1.6

MTS

• Reduction in hot

metal

40% MARKET SHARE

1.25 MTS PRODUCTION

40%MARKET CUSTOMERS OUTLOOK

ALUMINIUM

• Demand

increased by 8%

• Prices decreased

by 1%

• Industries: Cable,

transformers

manufactures

• Countries: China,

Vietnam, UAE

• Sustain current

production and

reduce the cost

profile

35% MARKET SHARE

402KMTS PRODUCTION

(Increase by 5%)


COPPER

• Demand increased

by 2%

• Prices up by 30%

• Industries:

Construction, iron

• Countries: Nepal,

Bangladesh,

Taiwan, China

• Expected

production in

FY2017-18:

950KTS

• COP will increase

72% MARKET SHARE

907KMTS PRODUCTION

(Increase by 2%)


ZINC

GLOBAL PRESENCE

ALUMINIUM

COPPER

ZINC

IRON ORE

North America

South America

China

Malaysia

VietnamUAE

Nepal

Bangladesh

Taiwan

Sri Lanka

South Korea

Europe

Company Snapshot




Financial Analysis

Capital Structure

Liquidity Analysis

Investment Summary


AGENDA

Stakeholder relationship committee

CSR Committee

Nomination & Remuneration

committee

Risk Management

Committee

Committee of directors

Key Highlights:

Audit Committee

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•

•

•

•

•

•

•

•

•

MANAGEMENT & CORPORATE GOVERNANCE

Company Snapshot




Financial Analysis

Capital Structure

Liquidity Analysis

Investment Summary


AGENDA

INDUSTRY OVERVIEW & COMPETITIVE POSITIONING

INDUSTRY COMPETITION

Al

Cu

Zn

• High caustic soda consumption• Increase in Graphite electrode price

Host of cost saving initiatives

• Smart cities mission, Railway modernization

• Declining global steel production

• Import from ASEAN countries with zero import duty

• High cost of working capital

• Closest competitor Hindalco (1.19MTS)• Global leader China: 55% market share

• Closest competitor: Binani zinc (0.03 MMTPA)

• Global leader – China: 37% market share

• Closest competitor:Hindustan Copper Ltd.

• Global leader – Chile: 34% market share

Company Snapshot




Financial Analysis

Capital Structure

Liquidity Analysis

Investment Summary


AGENDA

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2014-15 2015-16 2016-17

EBIT

DA

Mar

gin

(%

)

INR

In C

rore

s

Revenue, EBITDA & EBITDA Margin

Revenue EBITDA EBITDA Mrgin(%)

FINANCIAL PERFORMANCE OF VEDANTA LTD.

12% 41% 25%

Source -Bloomberg

0.0

50,000.0

1,00,000.0

1,50,000.0

2,00,000.0

2,50,000.0

INR

Mill

ion

s

Revenue by Segments

FY 2015 FY 2016 FY 2017

Source -BloombergSource –Annual Report

Increased Capacity


0

1000

2000

3000

4000

5000

6000

7000

8000

Pri

ces

in $

/mt

LME Commodity Pricing

LME Zinc LME Aluminum LME Copper Price

Improved Commodity Prices

18%

1 2

Cost Efficiency


3

14%

7%

57%

14%

8%

SEGMENT-WISE CONTRIBUTION TO COST SAVINGS (%)

ZINC COPPER ALUMINIUM & POWER OIL & GAS IRON ORE

COMPETITORS FOR PEER COMPARISON

Anglo AmericanHindalco Industies

Rio Tinto Group

BHP Biliton Ltd.National AluminiumCompany

Hindustan Copper

Source -Bloomberg

-

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

1,60,000

FY 14 FY 15 FY 16 FY 17

INR

in C

rore

s

Revenue from Operations

Vedanta Ltd. Average of top 6 competitors

-

10,000

20,000

30,000

40,000

50,000

60,000

FY 14 FY 15 FY 16 FY 17

INR

in C

rore

s

EBITDA


30.97 30.05

23.77

29.78

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

FY 14 FY 15 FY 16 FY 17

EBITDA Margin (%)


•

•

FINANCIAL PERFORMANCE – PEER COMPARISON

Source -Bloomberg

-10.00

-5.00

0.00

5.00

10.00

15.00

FY 13 FY 14 FY 15 FY 16 FY 17

Return on Assets (%)

Vedanta Ltd. Average of top 6 Competitors-30.00

-25.00

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

FY 13 FY 14 FY 15 FY 16 FY 17

Return on Equity (%)

Vedanta Ltd. Average of top 6 Competitors

FINANCIAL PERFORMANCE – PEER COMPARISON

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•

•

Company Snapshot




Financial Analysis

Capital Structure

Liquidity Analysis

Investment Summary


AGENDA

60%

33%

7%

SHAREHOLDING PATTERN AS ON 31ST

MARCH, 2017

TOTAL PROMOTER TOTAL PUBLIC ADR

Source: Company Annual Report

CAPITAL STRUCTURE

Particulars INR CRORES

Cash and cash equivalents 9,863.71

Other bank balances 4,259.03

Non-current bank deposits 2,779.27

Current investments 46,889.18

Total (a) 63,791.19

Non-current borrowings 30,255.14

Current borrowings 32,244.87

Current maturities of non-current borrowing 9,069.00

Total (b) 71,569.01

Net debt (c=(b-a)) 7,777.82

Total equity (d) 74,428.04

Total capital (e = equity + net debt) 82,205.86

Gearing ratio (c/e) 0.09

TERM

LOAN- USD

10%

TERM LOAN-

RUPEE

31%

EXTERNAL COMMERCIAL

BORROWINGS

3%

REDEEMABLE NON-

CONVERTIBLE

DEBENTURES

19%

COMMERCIAL

PAPER

33%

WORKING CAPITAL LOAN

2%

OTHERS

2%

TOTAL BORROWINGS BREAKDOWN

Source: Company Annual Report

1.13

0.630.48

0

0.2

0.4

0.6

0.8

1

1.2

DEBT TO EQUITY

X t

imes

Debt to Equity

FY 2015 FY 2016 FY 2017

0.62

0.40.29

00.10.20.30.40.50.60.7

Long-term Debt to Equity

X t

imes

Long-term Debt to Equity

2015 2016 2017

DEBT ANALYSIS

02468

10121416

Average Cost Of Debt falling due to increased borrowings in USD

Weighted AverageCost of Debt Weighted Average Cost of Cap

Weighted AverageCost of Equity

Source: Bloomberg

COST OF BORROWINGS

•

•

1.49

0.720.54

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2015 2016 2017

NET DEBT/EBITDA (PEER COMPARISON)

VEDL TOP COMPETITORS

2.19

1.65 1.74

0.00

0.50

1.00

1.50

2.00

2.50

FY 2015 FY 2016 FY 2017

X T

IMES

DSCR of Vedanta Ltd.

•

•

•

•

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•

Source: Bloomberg Source: Company Annual Report

DEBT SERVICABILITY

Company Snapshot




Financial Analysis

Capital Structure

Liquidity Analysis

Investment Summary


AGENDA

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

FY 14 FY 15 FY 16 FY 17

No

. of

day

s

Accounts Receivable Turnover Days


0.00

50.00

100.00

150.00

200.00

250.00

300.00

FY 14 FY 15 FY 16 FY 17

No

. of

day

s

Inventory Days


0.00

50.00

100.00

150.00

200.00

250.00

300.00

FY 14 FY 15 FY 16 FY 17

No

. of

day

s

Accounts Payable Turnover Days


-150.00

-100.00

-50.00

0.00

50.00

100.00

150.00

FY 14 FY 15 FY 16 FY 17

No

. of

day

s

Working Capital Conversion Cycle

Vedanta Ltd.

Average of top 6competitors

Source -Bloomberg

WORKING CAPITAL – PEER COMPARISON

0

0.5

1

1.5

2

2.5

3

FY 14 FY 15 FY 16 FY 17

X t

imes

Current Ratio


0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

FY 14 FY 15 FY 16 FY 17

X t

imes

Quick Ratio


0.00

0.10

0.20

0.30

0.40

0.50

0.60

FY 14 FY 15 FY 16 FY 17

X t

imes

Asset Turnover Ratio

Vedanta Ltd. Average of top 6 Competitors

Source -Bloomberg

LIQUIDITY PERFORMANCE – PEER COMPARISON

•

•

0

5

10

15

20

25

30

FY 14 FY 15 FY 16 FY 17

%

CFO to Sales


0.00

0.10

0.20

0.30

0.40

0.50

0.60

FY 14 FY 15 FY 16 FY 17

X t

imes

CFO to Total Debt


0.00

5000.00

10000.00

15000.00

20000.00

25000.00

30000.00

35000.00

FY 14 FY 15 FY 16 FY 17

INR

in C

rore

s

Free Cash Flow


0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

FY 14 FY 15 FY 16 FY 17

X t

imes

CFO to EBITDA


Source -Bloomberg

•

•

LIQUIDITY PERFORMANCE – PEER COMPARISON

Company Snapshot




Financial Analysis

Capital Structure

Liquidity Analysis

Investment Summary


AGENDA

RATING HISTORY

Particulars Current Rating (Dec 19 2017)

Previous Rating (Sep 14 2016)

Comments

Long term bank facilities and debt instruments

AA/Stable AA-/Positive Better operating performance, deleveraging of balance sheet and stable commodity prices

Short term debt A1+ A1+

Particulars Current Rating (Oct 31 2017)

Previous Rating (Dec 20 2016)

Comments

Term Loans IND AA/Positive IND AA/Stable Diversified business profile, successful liability management and strong volume ramp up across segments

Commercial paper IND A1+ IND A1+

India Ratings & Research

CRISIL

KEY RATING DRIVERS

Merger with CAIRN

Diverse Company

Profile

High past Capex

funded by debt

UncertainProduction

Capacity Expansion

Cost Efficiency

Increasing Short Term Obligation-falling CR

Growing EBITDA

Excellent safety and

security Mgmt

CAIRN Tax Obligation

Deleverage – falling

debt equity ratio

KEY RATING DRIVERS

Merger with CAIRN

Diverse Company

Profile

Capacity Expansion

Cost Efficiency

Growing EBITDA

Excellent safety and

security Management Deleverage

– falling debt equity

ratio

LOW MEDIUM HIGH

IMPACT ASSESSMENT –KEY RATING DRIVERS

LOW MEDIUM HIGH

UncertainProduction

High past Capex

funded by debt

CAIRN Tax Obligation

Increasing Short Term Obligation-falling CR

IMPACT ASSESSMENT - KEY RATING DRIVERS

0.00

0.05

0.10

0.15

0.20

0.25

Q1 2017-18 Q2 2017-18 Q3 2017-18

x ti

mes

Debt Service Coverage Ratio

0

500

1000

1500

2000

2500

Q1 2017-18 Q2 2017-18 Q3 2017-18

INR

in C

rore

s

EBITDA

0

2000

4000

6000

8000

10000

12000

14000

Q1 2017-18 Q2 2017-18 Q3 2017-18

INR

in C

rore

s

Revenue from Operations

Source –Unaudited Quarterly Reports

PERFORMANCE OF VEDANTA LTD. OVER FY 17-18 (3 QTRS)

Company Snapshot




Financial Analysis

Capital Structure

Liquidity Analysis

Investment Summary


AGENDA

Credit Rating Corresponding Score

AAA 10

AA+ 9

AA8

(Existing Rating)

AA- 7

A+ 6

A 6

A- 5

BBB+ 4

BBB 3

BBB- 2

BB+ 1

BB 1

BB- 1

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•

Final Recommendation

Overweight = Buy Neutral = Hold Underweight = Sell

RATING AND RECOMMENDATION

THANK YOU

vedanta ltd. credit report...vedanta ltd. average of top 6 competitors source -bloomberg working...

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