A Financial Report

Submitted To
Dombivli Shikshan Prasarak Mandal’s
K.V. Pendharkar College (Autonomous), Dombivli(E).

For partial completion of the degree of

Bachelor in commerce (Accounting & Finance)
Academic Year: 2022-2023

Under the Faculty of

Commerce By
LAVANYA SUBHASH BHOIR
F.Y.BAF & B
228084

Under the Guidance of

MS. BHAKTI PAWASKAR
MS. JYOTI DWIVEDI
 INDEX

Sr.No. Contents Page No.

1 Summary 3
2 Chapter 01 Introduction 4
3 Chapter 02 Company Profile 5-6
4 Chapter 03 Financial Analysis 7-18
5 Chapter 04 Conclusion 19-20
6 Bibliography 21
7 Annexure 22-27

1
FINANCIAL
REPORT
OF
VEDANTA
LIMITED

2
 SUMMARY

The purpose of this project is to financially study company Vedanta Limited by

doing financial analyses and research. Both quantitative and qualitative methods
were used for this report. Qualitative methods are introduction and conclusion.
Quantitative methods are analyses and charts. Information of finance for three
years: 2020,2021,2022. This report shows whether the changes are major or
minor and the financial position of Vedanta Limited.
Vedanta Ltd., incorporated in the year 1965, is a Large Cap company (having a
market cap of Rs 108,505.04 Crore) operating in Diversified sector. Vedanta
Ltd. key Products/Revenue Segments include Aluminium, Copper, Oil & Gas,
Pig iron, Iron Ore, Others, Power, Metallurgical Coke, Export Incentives, Scrap,
Other Operating Revenue, Other Sales for the year ending 31-Mar-2022.
Vedanta Limited reported earnings results for the first quarter ended June 30,
2022. For the first quarter, the company reported sales was INR 382,510 million
compared to INR 281,050 million a year ago. Revenue was INR 393,550
million compared to INR 291,510 million a year ago. Net income was INR
44,210 million compared to INR 42,240 million a year ago. Basic earnings per
share from continuing operations was INR 11.92 compared to INR 11.4 a year
ago. Diluted earnings per share from continuing operations was INR 11.84
compared to INR 11.31 a year ago.

3
 CHAPTER 01: INTRODUCTION

Vedanta Limited is an Indian multinational mining company. It is one of the

world's leading diversified natural resources companies. Vedanta Resources
Ltd. is listed on the London Stock Exchange and a constituent of FTSE 100
Index.
Vedanta Ltd (Vedanta), formerly Sesa Sterlite Limited, is a diversified metal
and mining company. The company, along with its subsidiaries, focuses on the
exploration, mining, processing, and exporting of natural resources, power, and
oil and gas businesses. Its product portfolio includes lead, zinc, silver, copper
rod and cathodes, aluminium, iron ore, commercial power, steel, nickel and
copper and oil and gas across India. Vedanta Limited have their mines in Goa,
Karnataka, Rajasthan and Odisha. It also carries out the production of pig iron
and metallurgical coke.
The company also provides support activities, such as shipping, port services
and shipbuilding. It has operations in the US, Asia-Pacific, Europe, the Middle
East, Namibia, Ireland, Australia and Africa. Vedanta is headquartered in
Mumbai, Maharashtra, India. The company holds industry-leading market
shares across its core divisions. Vedanta Limited is a Vedanta Group company.
Financial analyses are considered significant since it measures a company's
economic positioning and helps companies to prepare themselves for the future,
using multiple ratios like the current ratio and the growth ratio. Financial
analyses frequently allow businesses to assess their efficiency and decide the
costs and disadvantages of their operations.

4
 CHAPTER 01: COMPANY PROFILE
VEDANTA LIMITED
Industry:
Metals & Mining
Sector:
Materials
BSE:
500295 
NSE:
VEDLEQ
CIN:
L13209MH1965PLC291394
ISIN code:
INE205A01025
SECT:
Diversified
Employees:
17.05 k
Hindustan Zinc Alloys Private Limited operates as a subsidiary of Vedanta
Limited

Contact Information:
Address: Atul Projects, Chakala Andheri (East) Mumbai,400093 India
Phone: +91 22 6643 4500
Fax: +91 22 6643 4530
Web: https://www.vedantalimited.com
Email: comp.sect@vedanta.co.in

5
Top Executives:
Name/Title
Sunil Duggal
CEO & Whole Time Director
Mahendra Kumar Sharma
Non-Executive Independent Director
Anil Kumar Agarwal
Non-Executive Chairman
Padmini Aditya Vikram Somani
Non-Executive Independent Director
Navin Kumar Agarwal
Executive Vice Chairman
Dindayal Jalan
Non-Executive Independent Director
Priya Agarwal Hebbar
Non-Executive Non-Independent Director
Padmini Sekhsaria
Non-Executive Independent Director
Akhilesh N. Joshi
Non-Executive Independent Director
Upendra Kumar Sinha
Non-Executive Independent Director

6
 CHAPTER 03: FINANCIAL ANALYSIS

Vedanta WACC % Calculation:

The weighted average cost of capital (WACC) is the rate that a company is
expected to pay on average to all its security holders to finance its assets. The
WACC is commonly referred to as the firm's cost of capital. Generally
speaking, a company's assets are financed by debt and equity. WACC is the
average of the costs of these sources of financing, each of which is weighted by
its respective use in the given situation. By taking a weighted average, we can
see how much interest the company has to pay for every dollar it finances.

WAC (E + Cost of (E + Cost of (1- Tax

=E/ * +D/ * *
C D) Equity D) Debt Rate)

1.Weights:
Generally speaking, a company's assets are financed by debt and equity. We
need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today,
Vedanta's market capitalization (E) is $15333.450 Mil.
The market value of debt is typically difficult to calculate, therefore, we use
book value of debt (D) to do the calculation. It is simplified by adding the latest
two-year average Short-Term Debt & Capital Lease Obligation and Long-Term
Debt & Capital Lease Obligation together. As of Jun. 2022, Vedanta's latest
two-year average Short-Term Debt & Capital Lease Obligation was
$2464.8046390877 Mil and its latest two-year average Long-Term Debt &
Capital Lease Obligation was $5003.2722060249 Mil. The total Book Value of
Debt (D) is $7468.0768451126 Mil.
a) weight of equity = E / (E + D)
= 15333.450 / (15333.450 + 7468.0768451126)
= 0.6725
b) weight of debt = D / (E + D)
= 7468.0768451126 / (15333.450 + 7468.0768451126)
= 0.3275

7
2. Cost of Equity:
We uses Capital Asset Pricing Model (CAPM) to calculate the required rate of
return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return
of the Market - Risk-Free Rate of Return)
a) We uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is
updated daily. The current risk-free rate is 7.40000000%. Please go
to Economic Indicators page for more information. Please note that we use the
10-Year Treasury Constant Maturity Rate of the country/region where the
company is headquartered. If the data for that country/region is not available,
then we will use the 10-Year Treasury Constant Maturity Rate of the United
States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected
excess market returns. Vedanta's beta cannot be obtained because it has a price
history shorter than 3 years. It will thus be set to 1 as default to calculate
WACC.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called
market premium.
We require market premium to be 6%.
Cost of Equity = 7.40000000% + 1 * 6% = 13.4%

3. Cost of Debt:
We uses last fiscal year end Interest Expense divided by the latest two-year
average debt to get the simplified cost of debt.
As of Mar. 2022, Vedanta's interest expense (positive number) was
$629.61349055514 Mil. Its total Book Value of Debt (D) is $7468.0768451126
Mil.
Cost of Debt = 629.61349055514 / 7468.0768451126 = 8.4307%.
4. Multiply by one minus Average Tax Rate:
We uses the latest two-year average tax rate to do the calculation. The
calculated average tax rate is limited to between 0% and 100%. If the calculated
average tax rate is higher than 100%, it is set to 100%. If the calculated average
tax rate is less than 0%, it is set to 0%.
The latest Two-year Average Tax Rate is 19.785%.

8
Vedanta's Weighted Average Cost of Capital (WACC) is calculated as:
WACC = E / (E + D) * Cost of Equity + D / (E + D) * Cost of Debt * (1-Tax Rate)
= 0.6725 * 13.4% + 0.3275 * 8.4307% * (1 - 19.785%)
= 11.23%

Notes:
* For Operating Data section: All numbers are indicated by the unit behind each
term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio,
and percentage. All currency related amount is indicated in the company's
associated stock exchange currency.

Vedanta WACC % Distribution:

For the Metals & Mining industry and Basic Materials sector, Vedanta's WACC

% distribution charts can be found below:
* The bar in red indicates where Vedanta's WACC % falls into.

9
Vedanta Ltd. WACC % Explanation:

Because it costs money to raise capital. A firm that generates higher ROIC

% than it costs the company to raise the capital needed for that investment is
earning excess returns. A firm that expects to continue generating positive
excess returns on new investments in the future will see its value increase as
growth increases, whereas a firm that earns returns that do not match up to its
cost of capital will destroy value as it grows.

GROWTH MARGINS & RATIOS:

Description: Revenue represents the value of goods sold and services provided to

third parties during the year.

10
Commentary: In FY2022, consolidated revenue was highest ever at `131,192 crore
compared with `86,863 crore in FY2021. This was primarily driven by higher
commodity prices, higher volumes at Aluminium, Copper, TSPL, IOB and FACOR,
increased premium at Aluminium and HZL, rupee depreciation, partially offset by
lower power sales at VAL and BALCO.

Description: Earnings before interest, tax, depreciation and amortisation (EBITDA)

is a factor of volume, prices and cost of production. This measure is calculated by
adjusting operating profit for special items and adding depreciation and
amortisation.
Commentary: Historical high EBITDA for FY2022 at `45,319 crore, 66% higher y-
o-y. This was mainly driven by higher commodity prices at Aluminium, Zinc, Cairn
and Iron & Steel and higher sales realisation from Iron ore & Steel business,
increased volumes at Aluminium, Zinc International and Iron Ore business, partially
offset by headwinds in input commodity prices.

Description: Calculated as EBITDA margin excluding EBITDA and turnover from

custom smelting of Copper India and Zinc India businesses.

11
Commentary: Adjusted EBITDA margin for FY2022 was 39% (FY2021: 36%).

Description: This represents net cash flow from operations after investing in growth
projects. This measure ensures that profit generated by our assets is reflected by cash
flow, in order to de-lever or maintain future growth or shareholder returns.
Commentary: We generated record high FCF of `21,715 crore in FY2022, driven
by strong cash flow from operations, partially offset by higher sustaining and project
capital expenditure.

Description: This is calculated on the basis of operating profit, before special items

and net of tax outflow, as a ratio of average capital employed. The objective is to
earn a post-tax return consistently above the weighted average cost of capital.
Commentary: Strong ROCE of c.30% in FY2022 (FY2021: 19%), primarily due to
strong operating and financial performance coupled with higher cash flow from
operations.

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Description: This ratio represents the level of leverage of the Company. It
represents the strength of the balance sheet of Vedanta Limited. Net debt is
calculated in the manner as defined in Note 18 of the consolidated financial
statements.
Commentary: Net debt/EBITDA ratio as at 31 March, 2022 was at 0.5x (lowest in
5 years), compared to 0.9x as at 31 March, 2021.

Description: The ratio is a representation of the ability of the Company to service its

debt. It is computed as a ratio of EBITDA divided by gross finance costs (including
capitalised interest) less investment revenue.
Commentary: The interest cover for the Company was at c. 18.1x, higher y-o-y on
account of higher EBITDA.

OTHER KEY FINANCIAL RATIOS:

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Description: The debtors’ turnover ratio is an accounting measure used to quantify
a company’s effectiveness in collecting its receivables. This is calculated as a ratio
of revenue from operation to average trade receivables.
Commentary: The debtor’s turnover ratio was at 32.5x.
*Excluding Power business

Description: The inventory turnover ratio is an efficiency ratio that shows how

effectively inventory is managed. This is calculated as a ratio of cost of goods sold
to average inventory
Commentary: The inventory turnover ratio for the Company was at 7.1x in
FY2022 as compared to 5.6x in FY2021.

14
Description: The current ratio is a liquidity ratio that measures a Company’s ability
to pay short-term obligations or those due within one year. This is calculated as a
ratio of Current Assets to Current Liabilities.
Commentary: The current ratio of the Company remained flat at c.1.0x.

Description: It is a financial ratio indicating the relative proportion of shareholders’

equity and debt used to finance a Company’s assets. This is calculated as a ratio of
total external borrowing to total equity (share capital + reserves + minority).
Commentary: The ratio has decreased to 0.6x in FY2022 primarily because of
decrease in gross debt due to the repayment of debt at HZL, BALCO and CIHL
partially offset by increase in borrowing at Vedanta Standalone.

Description: Operating profit margin is a profitability or performance ratio used to

calculate the percentage of profit a company produces from its operations. This is
calculated as a ratio of operating profit (EBITDA less depreciation) to revenue from
operations.

15
Commentary: The operating profit margin was higher in FY2022 as compared to
FY2021, primarily due to higher EBITDA, partially offset by higher depreciation in
the current year.

Description: It is a measure of the profitability of the company. This is calculated as

a ratio of net profit (before exceptional items) to revenue from operations.
Commentary: The net profit margin was at 17% in FY2022 as compared to 19% in
FY2021.

Description: It is a measure of the profitability of the company. This is calculated as

a ratio of net profit (before exceptional items) to average net worth (share capital +
reserves + minority).
Commentary: The return on net worth has increased, mainly on account of increase
in EBITDA during the year.

LONG-TERM VALUE

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Description: This represents the amount invested in our organic growth programme
during the year.
Commentary: Our stated strategy is of disciplined capital allocation on high-return,
low-risk projects. Expansion capital expenditure during the year stood at ₹5,659
crore.

Description: This represents the net profit attributable to equity shareholders and is

stated before exceptional items and dividend distribution tax (net of tax and minority
interest impacts).
Commentary: In FY2022, EPS before exceptional items was at `52.02 per share.
This mainly reflects the impact of lower depreciation charges and higher EBITDA.

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Description: Dividend per share is the total of the final dividend recommended by
the Board in relation to the year, and the interim dividend paid out during the year.
Commentary: The Board has recommended a total interim dividend of ₹45 per
share this year compared with ₹ 9.50 per share in the previous year.
As of today (2022-10-10), Vedanta's weighted average cost of capital is 11.23%.
Vedanta's ROIC % is 33.55% (calculated using TTM income statement data).
Vedanta generates higher returns on investment than it costs the company to raise
the capital needed for that investment. It is earning excess returns. A firm that
expects to continue generating positive excess returns on new investments in the
future will see its value increase as growth increases.

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 Chapter 04: Conclusion

To conclude, Vedanta's weighted average cost of capital is 11.23%.

Vedanta's ROIC % is 33.55% (calculated using TTM income statement data).
ROE Outperforming 5 Year Average:
Company delivered ROE of 28.75% in year ending 31 Mar, 2022 outperforming
its 5-year avg. of 13.36%. (Source: Consolidated Financials)
Beating 3 Yrs. Revenue CAGR:
Company's annual revenue growth of 48.0% outperformed its 3-year CAGR of
11.97%. (Source: Consolidated Financials)
Stock Returns vs Nifty 100:
Stock gave a 3-year return of 106.8% as compared to Nifty 100 which gave a
return of 54.43%. (As of last trading session)
Employee & Interest Expense:
Company has spent 3.61% of its operating revenues towards interest expenses
and 2.12% towards employee cost in the year ending 31 Mar, 2022. (Source:
Consolidated Financials)
The company has accumulated 576.79 B in total debt with debt-to-equity ratio
(D/E) of 0.75, which is about average as compared to similar companies.
VEDANTA LIMITED has a current ratio of 0.93, indicating that it has a
negative working capital and may not be able to pay financial obligations in
time and when they become due. Debt can assist VEDANTA until it has trouble
settling it off, either with new capital or with free cash flow. So, VEDANTA's
shareholders could walk away with nothing if the company can't fulfil its legal
obligations to repay debt. However, a more frequent occurrence is when
companies like VEDANTA LIMITED sell additional shares at bargain prices,
diluting existing shareholders. Debt, in this case, can be an excellent and much
better tool for VEDANTA to invest in growth at high rates of return. When we
think about VEDANTA's use of debt, we should always consider it together
with cash and equity.
VEDANTA LIMITED (VEDL) is traded on National Stock Exchange of India
in India and employs 17,047 people. The company currently falls under 'Mega-
Cap' category with current market capitalization of 1400 B. Market
capitalization usually refers to the total value of a company's stock within the

19
entire market. To calculate VEDANTA's market, we take the total number of its
shares issued and multiply it by VEDANTA's current market price. To manage
market risk and economic uncertainty, many investors today build portfolios
that are diversified across equities with different market capitalizations.
However, as a general rule, conservative investors tend to hold large-cap stocks,
and these looking for more risk prefer small-cap and mid-cap equities.
VEDANTA LIMITED operates under Basic Materials sector and is part
of Other Industrial Metals & Mining industry. The entity has 3.72 B outstanding
shares. VEDANTA LIMITED has accumulated about 317.7 B in cash with
239.8 B of positive cash flow from operations. This results in cash-per-share
(CPS) ratio of 85.7%.
Vedanta generates higher returns on investment than it costs the company to
raise the capital needed for that investment. It is earning excess returns. A firm
that expects to continue generating positive excess returns on new investments
in the future will see its value increase as growth increases.
*Note: The beta of this company cannot be obtained because it has a price
history shorter than 3 years. It will thus be set to 1 as default to calculate
WACC.

20
 BLIOGRAPHY

For making this financial report I have taken help from the following websites:
 https://www.google.com/
 https://www.vedantalimited.com/
 https://www.bseindia.com
 https://economictimes.indiatimes.com
 https://in.investing.com/equities/sesa-goa
 https://www.wikipedia.org

21
Annexure

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