Vedanta Resources Limited Credit Summary... 3 Introduction Vedanta Resources Limited (“Vedanta”...

www.vedantaresources.com

Vedanta Resources Limited

Credit Summary

(As of 30 September 2018)

http://www.vedantaresources.com/


2

TABLE OF CONTENTS

Introduction ................................................................................................................................................................................. 3

Investment Case .......................................................................................................................................................................... 4

Strategic Priorities........................................................................................................................................................................ 8

Key Credit Metrics ....................................................................................................................................................................... 9

Credit Ratings ............................................................................................................................................................................... 9

Appendix .................................................................................................................................................................................... 10

Group Structure ..................................................................................................................................................................... 10

Financial Summary and Key Financial Ratios ......................................................................................................................... 11

Group Borrowings Summary.................................................................................................................................................. 12



3

Introduction

Vedanta Resources Limited (“Vedanta” or the “Group”) is a global diversified natural resources group. Vedanta

has interests in oil and gas, zinc, lead, silver, aluminium, copper, iron ore, steel and commercial power.

Vedanta Resources Limited has listed and unlisted operating subsidiaries across India and Africa.

For the half year ended 30 September 2018, the Vedanta Group generated revenue of US$7.1 billion and EBITDA

of US$1.7 billion.

Consolidated Group Results (in US$ mn or as stated) H1 FY2019 H1 FY2018 FY2018

Revenue 7,058 6,767 15,359

EBITDA 1,710 1,694 4,051

EBITDA margin excluding custom Smelting1 (%) 29% 34% 35%

Operating Profit before special items 978 1,168 2,781

Free Cash Flow after Growth Capex (174) 232 925

Underlying attributable Profit2 (312) 26 162

ROCE% 13.8% 14.7%3 14.9%

Total Dividend (US cents per share) - 24 65

1 Excludes custom smelting revenue and EBITDA at Copper and Zinc-India operations as custom smelting has different business economics

2 Based on profit for the period, after adding back special items and other gains and losses, and their resultant tax and non-controlling interest effects

3 Recomputed on the basis of operating profit before special items and net of tax outflow, as a ratio of average capital employed



4

Investment Case

Our investment case is focused on delivering sustainable long-term returns to our shareholders and creating value for our broader stakeholder base.

A large, low-cost and diversified asset base with an attractive commodity mix

Vedanta’s large-scale, diversified asset portfolio, with attractive cost positions in some of the core businesses, positions the Company well to deliver strong margins and free cash flows through the commodity cycle. Vedanta’s focus on base metals and oil, commodities with strong fundamentals and leading demand growth, makes the Company’s commodity mix particularly attractive.

Demand 2018-2030 CAGR

Source: Wood Mackenzie, EIA

Ideally positioned to capitalise on India’s growth potential

India is Vedanta’s main market, and one which has huge growth potential. Current per capita metal consumption in India is significantly lower than the global average. Urbanisation and industrialisation, supported by government initiatives on infrastructure and housing, continue to drive strong economic growth and generate demand for natural resources.

We are strongly and uniquely positioned to benefit from this growth due to our:

established operations in India;

8.2%

6.7% 6.4%

5.0% 4.8%

3.4% 3.4% 3.3%

2.0%1.4%

2.6%1.7% 1.6%

0.3%

1.9%

0.5% 1.0%0.4%

Copper Aluminium Zinc Lead Iron ore Nickel Thermal Coal Met Coal Oil & Gas

India Demand Global Demand Vedanta Resources Commodity Presence



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strong market position across our businesses: we are India’s largest base metals producer, and the largest private sector oil producer; and

our operating team with a strong track record of executing growth in India.

Source: Wood Mackenzie, EIA, BMI, Global Insight

Note: All commodities-demand correspond to primary-demand

Well-invested assets driving cash flow growth

We are ramping-up production across a number of our businesses as a result of investments in the past years.

We have already started seeing the results of our investments, with Zinc India and Aluminium delivering record

output in the past year. Now, with the new growth plans for Oil & Gas that we initiated in FY2018, we expect

further delivery on ramp-ups and strong growth in free cash flow generation.



6

Operational excellence and technology, driving efficiency and sustainability

We constantly strive to improve our operations, integrate our businesses through the value chain and optimise

our performance through operational efficiencies and innovative technological solutions. We employ these tools

to further ensure that our operations have a positive impact on our stakeholders and, more broadly, society.

* Excludes custom smelting at Zinc India and Copper operations

Note: ICMM 2014 methodology adopted from FY2016 onwards

Strong Financial Profile

Our operational performance, coupled with a strong focus on optimising capital allocation, has helped

strengthen Vedanta’s financial profile. In FY2018, supported by the robust price environment, we have

delivered:

revenues of US$15.4 billion (+33% y-o-y) and EBITDA of US$4.1 billion (+27% y-o-y)

strong free cash flow, post-growth capex, of US$0.9 billion

robust ROCE of 14.9%

the highest-ever interim dividend of US$1.2 billion from Vedanta Limited, subsidiary of Vedanta

Resources in FY2018

deleveraging and extension of our debt maturities through proactive liability management

Cash and liquid investments of US$5.6 billion

1.4 1.5

0.6 0.7 0.8

FY14 FY15 FY16 FY17 FY18

Growth Capex ($bn)

2.7 2.62.3 2.2

1.7


Free Cash Flow pre capex ($bn)

45%38%

28%36% 35%


EBITDA margin (%)*

0.540.46 0.50

0.390.34


LTIFR



7

In H1 FY2019, we delivered

revenues of US$7.1 billion (+4% y-o-y) and EBITDA of US$1.7 billion (+1% y-o-y)

robust ROCE of 13.8%

Cash and liquid investments of US$5.5 billion

Note: Recomputed on the basis of operating profit before special items and net of tax outflow, as a ratio of average capital employed

Proven Track Record

We have a proven management team with a diverse and extensive range of sector and global experience who ensure that operations are run efficiently and responsibly. We have taken a disciplined approach to development, growing our production steadily across our operations with an ongoing focus on operational efficiency and cost savings. Since our listing in 2003, our assets have delivered an average of 16% CAGR production growth as of FY2018.

5.6% 5.2%3.4%

12.8%14.9%


ROCE (%)

1.82.3

3.12.7

2.4


ND/ EBITDA



8

16% CAGR Production Growth since Listing

All commodity and power capacities rebased to copper equivalent capacity (defined as production x commodity price / copper price) using average commodity prices for FY2018. Power rebased using FY2018 realisations, copper custom smelting production rebased at TC/RC for FY2018, iron ore volumes refers to sales with prices rebased at realised prices for FY2018

Strategic Priorities

Over the last few years, our strategic priorities have remained consistent with a focus on delivering growth and

long-term value to our stakeholders while upholding operational excellence and sustainable development

through our diversified portfolio.

In FY2018, we invested in the next phase of growth and announced expansion projects in our Oil & Gas and Zinc

business. We continued with these investments in H1 FY2019. These projects in addition to the ramp-ups

already underway in other businesses, will provide Vedanta with significant growth in its production capacities.

At the same time, we continually strive to improve our operations to achieve benchmark performance, optimise

costs and improve realisations. We are committed to achieve our objective of zero harm, zero wastage and

discharge, thus creating sustainable value for all our stakeholders.

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Zinc-Lead Silver Copper Aluminium Power Iron Ore Oil & Gas

+c. 60%



9

Key Credit Metrics

The key credit metrics remain comfortable and are in compliance with covenant levels specified by the lenders.

Metric H1 FY2019 FY2018 Covenant

(as on Sep’18)

Net Debt/ EBITDA 2.5x 2.4x < 3.0x

EBITDA/Net Interest Expense1 3.8 4.0x > 3.5x

Net Assets/Gross Debt 1.4 1.5x > 1.2x

Note: 1. Interest includes capitalized Interest

The above table shows the strictest of the covenant

Credit Ratings

Vedanta Resources is rated by two major rating agencies, S&P and Moody’s:

Agency Issuer Rating Issue Rating Outlook

S&P * B+ B+ Stable

Moody’s** Ba3 B2 Stable

* Last rating action on Jan 15 2017

**Last rating action on Nov 20, 2017

Additionally, some of our key subsidiaries are rated by domestic Indian rating agencies as summarised below:

Subsidiary Long Term Rating – CRISIL*

Long Term Rating – India Ratings**

Long Term Rating – ICRA***

Vedanta Ltd AA / Positive AA / Positive

Hindustan Zinc AAA / Stable -

BALCO - AA- / Stable

TSPL - A+ / Positive

* Last rating action for the Group on March 12, 2018

**Last rating action for VEDL on Nov 1, 2017 and TSPL on Nov 24, 2017

***Last rating action for BALCO on Nov 20, 2017



10

APPENDIX

GROUP STRUCTURE

Note: Shareholding as on September 30, 2018 *50% of the share in the RJ Block is held by a subsidiary of Vedanta Ltd



11

FINANCIAL SUMMARY AND KEY FINANCIAL RATIOS

FY2017 FY2018 H1 FY2019 Revenues 11,520 15,359 7,058 % Growth yoy 7% 33% 4% EBITDA 3,191 4,051 1,710 % margin 28% 26% 24% % margin(excluding custom smelting) 36% 35% 29% Operating Profit before special items 2,161 2,781 978 % margin 19% 18% (16%) Profit After Tax 880 1.469 (171) Attributable Profit (23) 236 (327) Underlying Attributable Profit 45 162 (312) Gross Interest Expense (1,341)1 (1,343)2 (680)3 Cash generated from Operations 3,494 3,414 1,134 Capital Expenditure- Expansion 668 820 504 Capital Expenditure- Sustaining 145 385 214 Total Assets 31,503 29,238 28,232 Cash and Liquid Investments 9,725 5,606 5,492 Total Debt4 18,229 15,194 15,687 Net Debt 8,504 9,588 10,195

1. The Group has reclassified US $ 41.6 million arising on the bond buybacks completed during the year ended FY2017 as special items

2. The Group has reclassified US$ 108.2 million arising on the bond buybacks completed during the year ended FY2018 and charges on an

unfavourable contractor arbitration order as special items

3. This excludes gain of US$ 9 million relating to arbitration of a historical vendor claim pursuant to Supreme Court Order in Aluminium

business

4. Includes HZL temporary short term borrowing of $ 1.2bn as of 31 Mar 2017



12

GROUP BORROWINGS SUMMARY

CASH AND DEBT – ENTITY WISE (AS OF 30 SEPTEMBER 2018)

The Group’s cash and liquid investments are held primarily in high-quality debt mutual funds and banks with high credit ratings. The underlying investment portfolios of the Indian subsidiaries are reviewed by CRISIL (a subsidiary of Standard & Poor) and they have rated Cash and Liquid investments of the Group at the highest level i.e “Tier 1 Portfolio Credit Quality” for H1 FY2019.

Debt numbers at Book Values. Since the table above shows only external debt, it excludes any inter-company loans 1. Includes Investment Companies 2. Cairn India Holdings limited is a 100% subsidiary of Vedanta Limited which holds 50% of the share in the RJ block 3. Others include: CMT, Fujairah Gold, MEL, VGCB, Sesa Resources Ltd, other Iron Ore companies, Vedanta Ltd. Investment companies, TSMHL, ASI and ESL



13

TERM DEBT MATURITY PROFILE (AS OF 30 SEPTEMBER 2018)

Notes: Term debt of $12.6 Bn ($6.4 Bn at Standalone and $6.2 Bn at Subsidiaries) Maturity profile excludes working capital and short term borrowing to $2.7 Bn; and preference share of $0.4 Bn

Continued focus on balance sheet management o Refinanced large part of FY19 maturity in H1 FY19, minimal residual maturities in H2 o Maturity extension of standalone debt increased to 3.6 years on rolling basis at Sep 2018 from

2.8 years at Dec 2016 o Marginal increase in interest costs despite rising benchmarks

Strong liquidity: Cash and liquid investments of $ 5.5 Bn and undrawn fund based line of credit of $1.1 Bn



14

DIVERSIFIED FUNDING SOURCES – TERM DEBT BREAKDOWN BY TYPE

(As of 30Sep 2018, Numbers as a % of total term debt of $12.6 billion)

42% of the gross debt is fixed interest rate, 58% floating rate

57% of the gross debt is USD / Foreign currency - denominated, 43% is INR-denominated

27%

15%

28%

30%

Bonds - USD

Bonds - INR

Term Loans - INR

Term Loans-USD/ForeignCurrency



15

BONDS OUTSTANDING (AS OF 30 SEPTEMBER 2018)

The group has USD-denominated bonds issued by Vedanta Resources Ltd as tabulated below:

Issuer ISIN Maturity Date

Issue Date

Currency

Issue Amount ($ mn)

O/S Amount ($ mn)

Coupon Listing Coupon Dates

Bonds

Vedanta Resources Ltd RegS: USG9328DAH38

144A: US92241TAH59 Jan 2019 May 2013 USD

1,200 252 6.00% SGX June

and Dec

Vedanta Resources Ltd

RegS: USG9328DAG54 144A: US92241TAG76

June 2021 June 2011 USD 900 670 8.25% SGX June

and Dec


RegS: USG9328DAM23 144A: US92241TAK88

July 2022 Jan 2017 USD 1,000 1,000 6.375% SGX Jan and

July


RegS: USG9321DAJ93 144A: US92241TAJ16

May 2023 May 2013 USD 500 500 7.125% SGX June

and Dec


RegS: USG9328DAP53 144A: US92241TAM45

Aug 2024 Aug 2017 USD 1,000 1,000 6.125% SGX

Feb and Aug


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