A Study on Financial Analysis of

Vedanta Resources
By
DIVYA PRAKASH
10092571
MBA Student DBS
Module: Financial Analysis
Guide & Lecturer
Enda Murphy

Index

Financial Analysis on Vedanta Resources Plc

Introduction
Organization Structure
Performance Indicators of Vedanta
Financials Of Vedanta
o
o
o
o

ROCE
Underlying EPS
EBIDTA
Price Earnings Ratio

Past & Future Predictions on data

Financial analysis of Vedanta data
SWOT Analysis Of Vedanta
Competitors of Vedanta
Rio Tinto Analysis
SWOT Analysis of Rio Tinto
Competitor
Conclusion
Bibliography

Introduction
Vedanta Resources is a multinational company that is listed on the
London Stock Exchange, It is a global diversified natural resources
Company with its major interests in Iron Ore, Zinc, Lead, Copper, Silver,
Aluminum, Oil & Gas & Power. Its operations spans across Ireland, India,
Namibia, Zambia, Sri Lanka, South Africa & Australia. Vedanta strong
emphasis on partnering with all its stakeholders based on the core values
of entrepreneurship, excellence, trust, inclusiveness and growth. Vedanta
is the Worlds second largest integrated Zinc Producer
Vedanta Achievements Last Financial Year 20141

Revenues of US $12.9 billion

EBIDTA of US $ 4.5 billion

1Financial highlights on home page http://www.vedantaresources.com/

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Financial Analysis on Vedanta Resources Plc

Underlying attributable profit US $ 93.4 million

Net debt reduced by US $ 0.7 billion over the last 12 months and by
US $ 2.1 b over 24 months.
Total dividend of 61 US Cents per share up to 5%

Vedanta is completing 10 years as a London Stock Exchange listed

company. In this decade Vedanta has been transformed from a Company
with revenues of $1289.5 million to revenues of $12.9 billion while its
Group wide market valuation has grown from $ 500 million to $ 40 billion
Year over year, Vedanta Resources plc has seen revenues fall from
$14.6B USD in 2013 to $12.9B USD in 2014. This along with an increase in
income tax expense has led to a reduction in the bottom line from a gain
of $162.0M USD to a loss of $196.0M.2

International Management Systems Standard ISO 14001 has authorized

Vedanta Resources and the proof is that many awards won by the
company such as Recognition of Commitment Award from the Institute of
Internal Auditors, USA in 2005, Vedanta Resources being the only
manufacturing company out of a total of four Indian companies to have
ever received this award, not to mention the numerous safety and
environment awards.

ORGANISATION STRUCTURE
Vedanta group is a global multinational company that operates in
diversified sectors. The governing body of Vedanta consist of its executive
and its non-executive directors. The executive directors of the board
consists of Mr. Anil Agarwal, followed by Mr. Navin Agarwal and Mr. Tom
Albanese. Mr. Anil Agarwal laid the foundation of the company and is
leading the company as the Chairman of Vedanta Group. Mr. Navin
Agarwal is the deputy executive chairman of Vedanta and looks after the
corporate business strategy and responsible for overall performance and
growth and also heads the executive committee. Mr. Tom Albanese is the
chief executive officer of Vedanta group.3
2 Accounts Report of Vedanta 2014

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Financial Analysis on Vedanta Resources Plc

Performance Indicators of Vedanta

Building Relationships with the Stakeholders helped Vedanta Group to
perform in the Global markets. The group has built a strong relationships
with different Communities, Host Countries Government, Shareholders,
Industries, Lenders, Civil Society & last but not the least their Employees
are the backbone for their Achievement.
3 http://profit.ndtv.com/news/corporates/article-ousted-rio-tinto-boss-tomalbanese-joins-vedanta-327253

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Financial Analysis on Vedanta Resources Plc

REVENUE OF VEDANTA SECTORWISE

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Financial Analysis on Vedanta Resources Plc

Revenue4 is the Services and goods provided to the clients during the
financial year. It was US $ 12.9 million in 2014 compared to UD$ 14.6
million in 2013.The reasons for the lower revenues last year was due to
weak commodity and Oil prices along with closure of Iron ore & Copper
operations in Tuticorin. Further lower volumes of Copper Zambia and Zinc
international businesses reduced the revenue.

4 http://www.vedantaresources.com/media/164998/VedantaAR2014.pdf page 2

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Financial Analysis on Vedanta Resources Plc

LONG TERM VALUE

ROCE
It is calculated by the basis of operating profit divided by Capital invested in
operations.

ROCE without Capital work in 2014 was 14.9 in compared to 17.5 in 2013.

Underlying EPS ( US Cents )

It is the net profit attributable to Equity Shareholders.

The Underlying EPS in 2014 was 34 US Cents per share compared to 135
US cents per share in 2013.The reason for the lower Underlying EPS in
2014 is due to reduced prices and interest cost of such as Jharsuguda
plant 2 interest.

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Financial Analysis on Vedanta Resources Plc

DIVIDEND PER SHARE (US Cents)

The total dividends paid out over a year is known as Dividend per share

EBIDTA (US $ Bn) It is the Earnings before interest, taxation,

depreciation,
Amortization/impairment and special items EBITDA of US$4.5 billion;
EBITDA
Margin of 45%

NET DEBT
Net debt was reduced by US$ 696.1 million to US$7,919.5 million as on
31 March 2014, The net Debt of Vedanta as on 31 March 2013 was UD
$8616.6 Vedantas net debt has been consistently reduced since FY2011
12, when it reached US$10,064.4 million. The paying off the debt is the
positive indicators for a companys performance.

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Financial Analysis on Vedanta Resources Plc

Vedanta Resources Past & future forecasting5

predictions on their Financials

According to this information we are able to get some figures what is

expected by the Company in Future forecasting in the next three years.
Vedanta Group will outperform the charts as per the data by independent
research done by different Analysts. In the next three years in 2017
annual year the sales and the Earnings will outperform and expected to
get around US $16.5 billion in 2017.This is just an assumptions of future
forecast done by agencies

5 http://www.4-traders.com/VEDANTA-RESOURCES-PLC-9590206/financials/

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Financial Analysis on Vedanta Resources Plc

Financial Analysis
Growth Profitability and Financial Ratios for
Vedanta Resources PLC6

Financials
Revenue USD Mil
Gross Margin %
Operating Income USD Mil
Operating Margin %
Net Income USD Mil
Earnings Per Share USD
Dividends USD
Payout Ratio %
Shares Mil
Book Value Per Share GBP
Operating Cash Flow USD Mil
Cap Spending USD Mil
Free Cash Flow USD Mil
Free Cash Flow Per Share
Working Capital USD Mil

2012
14,00
5
25.4
2,388
17
60
0.22
0.51
236.3
277
10.97
1,640
-2,796
-1,157
-2.62
2,415

2013
14,99
0
21.9
2,512
16.8
157
0.57
0.55
97.7
278
10.64
3,204
-2,233
970
2.31
2,640

2014
12,94
5
22.4
2,150
16.6
-196
-0.72
0.66
274
9.02
3,361
-2,185
1,176
2.58
3,542

Key Ratios -> Profitability

Margins % of Sales
Revenue
COGS
Gross Margin
SG&A
R&D
Other
Operating Margin
Net Int Inc & Other
EBT Margin

2012- 2013- 201403

03
03
100
100
100
74.56
78.07
77.58
25.44
21.93
22.42
4.06
5.5
5.39
0.01
1.43
0.28
1.07
17.05
16.76
16.61
-4.59
-5.38
-7.97
12.46
11.38
8.64

6 http://financials.morningstar.com/income-statement/is.html?
t=VED&region=gbr&culture=en-US

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Financial Analysis on Vedanta Resources Plc

Profitability
Tax Rate %
Net Margin %
Asset Turnover (Average)
Return on Assets %
Financial Leverage (Average)
Return on Equity %
Return on Invested Capital %
Interest Coverage

2012- 2013- 201403

03
03
29.6
2.35
11.51
0.43
1.05
-1.51
0.37
0.33
0.28
0.16
0.34
-0.43
9.88
10.45
11.31
1.16
3.48
-4.66
3.85
6.05
4.32
2.88
2.47
1.9

Key Ratios -> Cash Flow

Cash Flow Ratios
Operating Cash Flow Growth % YOY
Free Cash Flow Growth % YOY
Cap Ex as a % of Sales
Free Cash Flow/Sales %
Free Cash Flow/Net Income

2012- 201303
03
-905
19.97
-8.26
-19.34

14.9
6.47
6.17

201403
491
16.88
9.08
-6

Key Ratios -> Financial Health

Balance Sheet Items (in %)
Cash & Short-Term Investments
Accounts Receivable
Inventory
Other Current Assets
Total Current Assets
Net PP&E
Intangibles
Other Long-Term Assets
Total Assets
Accounts Payable
Short-Term Debt
Taxes Payable
Accrued Liabilities
Other Short-Term Liabilities
Total Current Liabilities
Long-Term Debt
Other Long-Term Liabilities
Total Liabilities

2012- 2013- 201403

03
03
15.22
17.61
20.19
1.93
1.7
1.56
3.71
4.28
3.84
2.13
2.2
2.69
22.99
25.79
28.28
75.32
72.08
68.42
0.04
0.04
0.28
1.65
2.1
3.03
100
100
100
3.87
5.28
4.78
9.04
9.58
9.61
0.06
0.27
0.06
4.77
17.74
27.87
44.26
89.88

4.92
20.04
26.53
43.85
90.43

6.02
20.47
27.58
43.11
91.16

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Financial Analysis on Vedanta Resources Plc

Total Stockholders' Equity
Total Liabilities & Equity

Liquidity/Financial Health
Current Ratio
Quick Ratio
Financial Leverage
Debt/Equity

10.12
100

9.57
100

8.84
100

2012- 2013- 201403

03
03
1.3
1.29
1.38
1.08
1.05
1.15
9.88
10.45
11.31
2.75
2.77
3.12

Key Ratios -> Efficiency Ratios

Efficiency
Days Sales Outstanding
Days Inventory
Payables Period
Cash Conversion Cycle
Receivables Turnover
Inventory Turnover
Fixed Assets Turnover
Asset Turnover

2012- 2013- 201403

03
03
21.5
20.33
20.97
63.42
57.24
67.39
79.73
65.51
83.49
5.19
12.05
4.87
16.98
17.96
17.41
5.76
6.38
5.42
0.54
0.44
0.4
0.37
0.33
0.28

Mergers & Acquisitions

Since 2004, Vedanta Resources had acquired the Madras Aluminum Co
Ltd. While taking stake into consideration the Vedanta resources taken
over 5 companies till finalization of balance sheet for 2010. Konkola
Copper Mines was acquired in 2004 & 2009.Many other Companies such
as Finsider International Co Ltd, Cairn India, Later in the year 2009 the
company acquired Sesa Goa Ltd,51 % of ownership to become India's
largest producer-exporter of Iron-Ore. The Acquisition was successful of
KCM, MALCO, Sterlite Gold Ltd and Sesa Goa which has added substantial
growth to the Vedanta Group as a whole.

Swot Analysis
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Financial Analysis on Vedanta Resources Plc

The SWOT analysis of Vedanta Resources will provide a clear and strategic
analysis of companys strength and weaknesses with opportunities and
threats, thus helping to understand the Business, Partners & competitors.

STRENGTHS:

Global presence of Assets in size and scale

Low production cost makes it competitive among its Groups
Growth in Volume and and increased their cash flows
Companys values their Employees which is competitive advantage
Technology with Excellence increased their strength.

WEAKNESS:

Company doesnt give importance to Marketing like Brand

Management
Unable to provide satisfactorily information
Facing legal cases on Environmental issues.

OPPORTUNITIES:

Efforts being made at Global level for acquiring businesses

Entry to Iron ore market by acquiring Sesa Goa.
Entry to Ireland by exploring Zinc in Lisheen mines Ireland.

THREATS:

Human Rights Protestors on Companies building threat to its Image.

Environmental problems in some areas like breach in human rights,
the land encroachment in the areas of Nyamgiri Hills in Orissa, the
rumors concerning the pollution of Lanjugarh,
Rumors are Giving threat to its image and dent to Vedanta Group
Image

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Financial Analysis on Vedanta Resources Plc

For the Assignment question 2

Being an Analyst of the company I would like to work on some financials of
the competitor company as they are doing good and giving better returns
in the share market.

COMPETITORS:
There are many competitors for Vedanta such as BHP Billiton plc, Rio
Tinto, Fresnillo plc etc
In this assignment I will take Rio Tinto plc as Vedantas major competitors and give Rios
data to compare with Vedanta group.
Rio Tinto chief executive Sam Walsh 7announced on 12 February
2015 a share buyback programme.
He stated: Last year, we made a clear commitment to materially increase
cash returns to our shareholders. We have delivered this today through a
12 per cent increase in our full year dividend and a proposed US$2 billion
share buy-back. These represent a total cash return, in respect of 2014, of
almost US$6 billion.

RIO TINTO
VEDANTA

7 http://www.riotinto.com/investors/share-buyback-14279.aspx

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Financial Analysis on Vedanta Resources Plc

In this Comparison of Data of Last three financial years Rio Tinto 8 is ahead
of Vedanta Group in every manner and their sales are three times of
Vedanta. Rio Tinto foundation was laid on 30 March, 1962 and its
headquarter is located in London, United Kingdom .The presence of Rio
Tinto is in more than 30 countries all over the globe and they also have
diversified business in Aluminium, Copper, Diamonds & Minerals, Energy
and Iron Ore. The Aluminium product group produces alumina, Bauxite
and primary aluminum production. The Copper product group produces
copper, with valuable by products of gold, molybdenum, silver and nickel.
The Diamonds & Minerals product group is engaged in mining, refining
and marketing operations across three sectors. The Energy product group
includes thermal coal, coking coal and uranium. The Iron ore product
group supplies the global seaborne iron ore trade.

Financial Analysis of Data of Rio Tinto For purchasing of 10 %

stake
8 http://www.riotinto.com/ar2014/

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Financial Analysis on Vedanta Resources Plc

2015

Capitalization

77 928 M$

Entreprise Value (EV)

PER

12,4x

(Price / EPS)

Capitalization / Revenue
Operating Margin

92 615 M$

(EBIT / Sales)

ROA

(Net Profit / Asset)

ROE

(Net Profit / Equities)

1,84x
23,5%
6,07%
13,0%

2016

90 353 M$
9,86x
1,68x
26,3%
7,15%
15,1%

According to Reports from Thomson Reuters the sales figures for Rio Tinto is to increase
in future to US $ 46 million in 2016 and as per the forecasting data

Finances - Leverage : Past and Forecast

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Financial Analysis on Vedanta Resources Plc

According to investment findings there are certain reasons For Investment

of 10 % stake in Rio Tinto are as follows

STRENGTHS:

On the Stock Exchange the Margins returned by Rio tinto is the

highest and gives high profits
Rio Tinto group has an attractive earnings. The P/E Ratio is at 12.37
for the year 2015 and it has the qualification for the potential
investment
The company has high hopes for the investors to assume it a high
Dividend earning stock in future years.
The current area with a good opportunity for investors interested in
buying this stock for buying in a midterm or long term perspective.

WEAKNESSES:

According to Thompson Reuters forecast, the Revenues growth

prospects of the Company are expected to be very low for the
next fiscal years.
Financial statements are not showing good hopes and have
disappointed market stakeholders. Most often, they were below
expectations of the Investors.

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Financial Analysis on Vedanta Resources Plc

For short-term investment plan, the company has poor

fundamentals. So better go for long term perspective to get
better returns.
Past twelve months, sales expectations have been downgraded,
which means that less important sales volumes are expected for
the current fiscal year over the previous period.

But apart from the Analysis I still believe to Purchase the stock as a
potential Investor on Behalf of My Organization but if we look into its
Opportunities we will get to know its earnings potential in coming years.

OPPURTUNITIES:

Nowadays all countries in the world are increasing their

infrastructure spending in order to increase the economy.
Infrastructure Spending" will have a long-term positive impact on
the entity and will get more business in different countries.
Rio Tinto is expanding their International mining operation in
countries as Coal has great demand all over the world.
Demand from emerging markets is helping growth and margins.
Markets emerging worldwide create new opportunities to expand
products from the developed world.

We should always keep in mind that Rio Tinto, which is the worlds secondlargest mining company after BHP Billiton and has a good investment
projects coming up which could improve its position and investors could
get good returns. With the given data above I would recommend to
purchase the stake in this company for better returns in later years. Rio
Tinto giant size and its vast operations around the world in compare to
Vedanta Resources. The product portfolio of Rio tinto comprises of
additional products like Diamond, Gold and other base metals. Even Rio
deals with the products like Iron ore, Zinc, Coppers like Vedanta does
worldwide. It also has more countries for exploration than Vedanta so the
possibilities are for their shareholders to get better returns in coming
years

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Financial Analysis on Vedanta Resources Plc

CONCLUSION:

Even in a Volatile market Vedanta remained strong and produced a robust

set of Results. Vedanta Resources is India's largest non-ferrous metal and
mining company based on
Revenue. This FTSE-100 company has a strong balance sheet and
revenues over US $ 12.9 billion. Moreover, it's the only Indian
manufacturing company listed at London Stock Exchange. The analysis
shown above explains the path of success of Vedanta Resources in mining
industry. This success can be hugely owed to its employees & corporate
strategies. But there are some glitches in the strategy which is shown as
evident by the SWOT analysis,
Vedanta did not gave any due consideration to the threats by its
competitors. If any of the competitors plans to start its business in India,
for mining then Vedanta would not be able to survive. More over their
corporate social responsibility has been lacking which has severely
affected their Brand-name, and thats a very important factor in today's
market. Vedanta should also try to explore new possibilities and expand
its bases in countries like Zambia Australia & other parts of the world
through mergers & acquisitions.
At Last the future of both the companies depends on the state of economy
around the world and the way both Rio & Vedanta manages their debts.
Vedanta Resources should come up with some radical competitive
strategies so that it is in a better position than their huge competitors like
BHP Billiton, Xastra, Rio Tinto, Arcelor Mittal etc. They also have to look
after their shareholders as they should reward shareholders accordingly to
minimize the conflict between the management of the company and their
key shareholders which includes individuals, banks & other investors

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Financial Analysis on Vedanta Resources Plc

BIBLIOGRAPHY

1. Annual report and accounts FY2014 available on Vedanta

resources website www.vedantaresources.com
2. http://www.londonstockexchange.com/exchange/pricesand-markets/stocks/exchange-insight/newsanalysis.html?fourWayKey=GB0033277061GBGBXSTMM
3. http://www.vedantaresources.com/investor-relations.aspx
4. http://www.vedantaresources.com/investorrelations/results-and-reports/financial-results.aspx
5. http://financials.morningstar.com/incomestatement/is.html?t=KAZ&region=gbr&culture=en-US
6. http://markets.ft.com/research/Markets/Tearsheets/Summ
ary?s=VED:LSE
7. Marketscanner.com Thomson Reuters
8. www.wikiwealth.com/swot-opportunity:infrastructure-spending
9. http://www.4-traders.com/VEDANTA-RESOURCES-PLC9590206/financials/

10.

http://www.riotinto.com/

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