Vedanta will increase its oil production from 2.25 lakh barrels to 4.50 lakh barrels in two years: Anil Agrawal, Chairman

Anil Agrawal, the founder and Chairman, Vedanta Resources Plc, talks about COVID-19 impact on his business, falling metal prices and crude oil, BPCL divestment and its expansion plans among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: Coronavirus (COVID-19) has impacted businesses globally. Suggest the ways to tackle this situation and has it had any impact on your business, if yes, to what quantum?

A: Whatsoever is happening in nature and the environment is not in our hands. In olden times, such a situation was termed as the holocaust. So, we can term it as per our wish but should do what we can do at our end. Leaders across the world are standing and are taking action at their end. They are united, today, and are saving their respective countries by sealing their borders and talking with doctors. Interestingly, Indian doctors spread across the world are taking lead. We are living in an advanced world and there must be some way out from this. 

Q: The metal price has crashed a lot and it is a matter of concern. What is your outlook on metal prices and do you think that it will fall further from these levels?

A: It has come down by 15%, while oil has fallen more than 50%. However, new mines can’t be opened across the world. And, you will always see that there will be a shortage for the non-ferrous commodity in the market. India is a country where exploration has not taken place, whereas 70%-80% exploration has been done in the rest of the world, while it stands at just 10% in India. So, the prices will decline in days to come. India has a positive and hungry government at present, which thinks how to proceed but should make quick decisions. For instance, you have seen that the iron ore was auctioned in the recent past that helped the government to raise huge money and more has to come, while even 1% has not started. It should auction more in the coming days in different segment like gold, silver, zinc, aluminium, bauxite and oil – which has huge potential but should be simplified more. I think India’s position will strengthen more in days to come.

Q: Crude prices have crashed more than 50% and are at the historical lows it will have a negative impact on Vedanta, which is a metal company. What is your outlook on crude and what impact it will have on overall business?

A: Our cost stands at $40 and if all the costs are taken together than it comes down to $20 but we are trying to reduce it further. At the same time, the government should reduce our cess and self-certify us by having full faith on us. Several government clearances are required, which should be brought down. I am not afraid of the prices and the ongoing price war between Saudi and Russia has benefitted India as it has helped us to save billions of dollars through all purchases. This money should be used for some good work or reach to the consumer instead of utilized in managing the deficit. The present government is very committed and should be given some time to work as it is provided with a benefit of doubt and space to every new government across the world so that they can work. Thus, the citizens of India should support the government so that it can deliver. 

Q: The government is quite bullish on disinvestment and is also looking forward to expediting the stake sales of BPCL and the Expression of Interest (EoI) will be out soon. Do you think that this correction in the valuations are attractive and you will you participate in EoI?

A: Yes, we will present our EoI for BPCL and they have said that bidders must have a minimum net worth of $10 billion as on date, which is not right because no company can do it. So, the government is considering the same. At the same time, the valuation of BPCL is very high and I would like the urge people from across the world to come forward and have a look on BPCL, which is a good asset and will provide a good footing in India. Thus everyone including us should come forward and take it, BPCL, ahead. But, the present valuations are too high and wait for more corrections in it. But we submit our EoI after which due diligence will be performed and the same will be done at other places. The asset should move to anyone whose price is the best. 

Q: What are your production and expansion plans for different businesses of Vedanta Group?

A: Right now we are engaged in increasing our oil production from 2.25 lakh barrels to 4.50 lakh barrels and the work will be completed in the next one and a half to two years. We will be happy to achieve the fete in which we will be producing 50% oil that is consumed in India. Likewise, we want to work on gas. We are looking forward to producing 2 million tonnes of Zinc, which will be the largest capacity in the world. We also want to produce 1,400 tonnes of silver, which is our capacity and with this, we will turn up to be the world’s largest silver producer. At the same time, we wish to produce 3 million tonnes integrated aluminium and will like to request the government to auction the bauxite mines at the earliest. 

Q: What could be the overall CapEx on expansion and over what time frame at least when several companies are holding on their investments?

A: We will not stop the work, but we will save money by looking at the cost and try to see the ways to bring it down, i.e. if something is costing Rs 100 then we will see it again that can it come down to Rs 75. We are in a position to cut our cost by 25% may it be a project or manufacturing. Our company earns a profit of Rs 25,000 crore every year and is likely to go up to Rs 40,000 crore in future. So, we have a cash flow, which will be used in expansion without borrowing and take the company forward. We are very comfortable and at the same time, the cost has gone down and everyone is supporting us and we are trying our best to reduce the cost at our end. The world is struggling today as they don’t have a market at present as the Chinese market is shut down at present and will have to wait to see what happens when it reopens. India can reap its benefit and our entrepreneurs should start manufacturing small products that were being imported from China to the country. At the same time, I would like to appeal from the youngsters to be a job creator instead of being a job seeker and open factories as banks have enough money and government incentives are also available for the purpose. You are living in the world of start-ups and that is an advantage. I think India and Indians will definitely find some way to deal with the virus and things will improve in days to come. 

Q: Stimulus packages are being announced amid these concerns and a huge rate cut has been announced in the US. Do you think that the RBI Governor should do something on this front to provide some relief to the industry in the form of a rate cut or stimulus package to help businesses? 

A: There is no country where buyback is taxed. Interestingly, healthy companies are willing to buy shares to create a positive environment. That’s why I would like to request the government to reduce the 22% taxation on share buyback at the earliest so that people can come out and buy their shares. It is very important. 

Watch Zee Business live TV below:

Q: The Yes Bank issue has shaken the confidence in the banking sector. What is your view on the issue?

A: One out of ten is bad. You can have a look other private banks like Axis Bank and IndusInd Bank among others that are functioning and have grown hugely. When it comes to Yes Bank than almost everyone was aware for the last two-three years that something may happen with it. The action would have been taken earlier on the bank and it would have been saved. It is very unfortunate that this happened.