Vedanta’s earnings soar 46% – What this record-breaking growth means for investors

Vedanta Limited (NSE: VEDL), the Indian multinational critical minerals, energy, and technology conglomerate, has reported record-breaking results for Q2 and H1 ending September 30, 2024. The company achieved its highest-ever first-half EBITDA, reaching $2.47 billion—an impressive 46% year-over-year increase. Vedanta‘s Q2 consolidated revenue hit $4.4 billion, marking a 5% quarter-over-quarter and a 10% year-over-year rise, alongside a consolidated EBITDA of $1.2 billion, a staggering 44% year-over-year increase.

Record Performance in Profit Margins and Cash Flow

Vedanta’s profit after tax (PAT), excluding exceptional items, soared to $533 million, up 230% year-over-year. The company registered a remarkable EBITDA margin of 34%, reflecting an improvement of approximately 900 basis points year-over-year. Furthermore, Vedanta generated $1.02 billion in free cash flow (pre-capex), representing a 50% increase year-over-year, while net debt-to-EBITDA reached a six-quarter low at 1.49x.

Financial and Strategic Milestones: Expert Commentary

Ajay Goel, Chief Financial Officer of Vedanta Limited, hailed this quarter as a period of outstanding performance, underscored by operational achievements, favorable commodity prices, and strategic financial initiatives. Goel attributed the success to the company’s focus on cost-efficiency and volume growth. He highlighted Vedanta’s strategic capital moves, including a $1 billion Qualified Institutional Placement (QIP) and a $400 million Offer for Sale (OFS) for Hindustan Zinc Limited (HZL). The company’s Holdco debt has been reduced to $4.8 billion, the lowest in a decade, thanks in part to the $1.2 billion VRL bond issuance and ongoing deleveraging efforts.

Future Growth Projections: Building on Q2 Momentum

Vedanta is poised to capitalize on the momentum achieved in the first half of the year, with multiple growth projects expected to come online in the second half. The company historically generates over 60% of its revenue in the latter half of the fiscal year, positioning it well for sustained earnings growth. Executive Director Arun Misra highlighted Vedanta’s commitment to reducing production costs, citing a reduction achieved over the past 12 to 15 months. He emphasized the company’s strategic priorities, which include operational excellence, ESG leadership, and a robust pipeline of growth projects.

Upcoming Demerger: A Structural Transformation

Vedanta’s proposed demerger, which is set to result in the formation of six separate listed companies, is progressing on schedule and has entered its final stages. This ambitious restructuring is anticipated to enhance shareholder value and streamline operations across Vedanta’s various business segments.