Vedanta’s FY26 Plan: Aggressive debt reduction meets bold capex push
Vedanta FY26 Strategy: ₹53,251 Crore Debt Reduction Plan Meets ₹1.7 Billion Growth Capex
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Vedanta Ltd, under Anil Agarwal’s leadership, unveils an ambitious FY26 strategy combining aggressive debt reduction with substantial growth investments. The company aims to reduce debt by $0.6 billion while deploying $1.5-1.7 billion in strategic capex across its core sectors.
Strategic Overview
Anil Agarwal’s Vedanta Ltd is embarking on a transformative fiscal year with a dual focus on financial optimization and growth acceleration. The company’s Executive Director, Arun Misra, has outlined targets for a 10% reduction in operational costs alongside a 10% increase in production levels.
Key Strategic Targets
- $1.5-1.7 billion group-level capex allocation
- Significant investments in Hindustan Zinc
- 10% cost reduction initiative
- 10% production growth target
Debt Reduction Strategy
Vedanta has demonstrated significant progress in its financial health, with the net debt-to-EBITDA ratio improving to 1.22x as of April 2025, down from 1.5x in the previous year. The company’s net debt position stands at ₹53,251 crore for FY25, showing improvement from ₹58,338 crore in the previous year.
Debt Reduction Roadmap
- FY26 Target: $0.6 billion reduction
- FY27 Target: Additional $0.7-0.8 billion reduction
- Ultimate Goal: Achieve 1x net debt-to-EBITDA ratio by FY27
The parent company, Vedanta Resources, has already demonstrated its commitment to debt reduction by decreasing its debt burden by $4 billion between FY22 and FY25, bringing it down to $4.9 billion.
Capital Expenditure Plans
Vedanta’s ambitious $9.5 billion capital expenditure program has already seen $5.5 billion deployment in strategic projects. The FY26 capex initiatives focus on key growth areas:
Major Expansion Projects
- BALCO facilities expansion
- Lanjigarh expansion targeting 2.8-3 million tonnes of value-added products by 2025
- Achievement of 5 million tonnes alumina capacity at Lanjigarh by fiscal year-end
- Hindustan Zinc’s renewable energy integration for cost optimization
India’s aluminium sector shows promising growth with a 12% annual demand increase, potentially offering margins exceeding $1,000 per tonne.
Risk Mitigation and Market Focus
While dollar-denominated debt poses some currency risk, Vedanta’s strong domestic focus provides natural hedging benefits:
Market Position Strengths
- 75% of zinc business focused on Indian market
- 50% of aluminium operations serving domestic demand
- 100% of oil & gas business within India
- Zinc international business (200,000 tonnes) primarily serving Asian and Middle Eastern markets
Demerger Progress and Future Outlook
The company’s strategic demerger into four distinct units (aluminium, zinc, oil & gas, and power/steel) is proceeding as planned. The second motion application to NCLT is scheduled for mid-2025, with completion targeted for September 2025.
The demerger aims to unlock shareholder value and optimize operations across all business verticals. The process includes the strategic transfer of mining leases as part of the comprehensive approval plan.
Published on May 4, 2025
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