Unlisted Shares

• Record-breaking production: Both hot metal (1.367 million metric tons, +1% YoY) and saleable production (1.284 million metric tons, +2% YoY) reached all-time highs in FY23. Revenue from operations increased 21% YoY in FY23 and has grown at a 8-year CAGR of 20.2%

• TMT Bars and Wire Rods lead the way: These products dominated production, accounting for 63% of the total output.

• DI Pipes division soars: This division achieved the most impressive year-on-year growth, surging by 50%.

Profitability:​
• Bottom-line decline despite top-line growth: Rapid price fluctuations in both inputs and finished goods impacted profits negatively.
• Coking coal price surge: Key raw material price spiked (53% rise YoY), affecting domestic production about 80% of which is reliant on imports.
• Russo-Ukraine conflict: Further hampered profitability through increased logistics costs.
• Return ratio dip: Operational profitability decline contributed to lower returns.
• Export duty withdrawal spurred Q4 recovery: Government policy change helped improve performance from Q4 onwards. • Asset Turnover ratio rise: Increased efficiency, with asset utilization growing from 50% to 70%.

Assets:

• ​​ESL Steel, operating under the esteemed legacy of the renowned Vedanta Group, is a fully integrated iron and steel manufacturing facility situated in Siyaljori Village, Bokaro, Jharkhand. At present, the company has a hot metal production capacity of 1.7 million metric tons per annum (MTPA), and an ongoing expansion initiative is in progress to boost the capacity to an impressive 3 MTPA of steel production.
• In a strategic move aimed at optimizing costs and ensuring a seamless supply of iron ore through backward integration, the parent group (Vedanta) took proactive measures during the Financial Year FY23. This involved the acquisition of two mines, resulting in a combined production of 5.67 million tons of iron ore from both mines. This strategic acquisition played a crucial role in making the steel plant self-sufficient in meeting its iron ore requirements during the financial year.
  

Investment Thesis: ​Despite a consistent increase in revenue over the years, the company has faced challenges in achieving profitability. Vedanta Limited has recently unveiled plans for a demerger, separating its metals, power, aluminum, and oil & gas businesses into independent verticals. The objective is to unlock the inherent value of each segment, potentially resulting in asset sales through the newly formed entities. As part of the demerger windfall, shareholders will be entitled to receive 1 share of each of the 5 newly listed entities for every 1 share of Vedanta Limited they currently own. This move has the potential to yield significant gains for the existing shareholders, especially with the prospect of interest from major steel players such as JSW Steel and ArcelorMittal in Vedanta's iron ore mines and steel plant.

Key Person: ​ESL Steel, nestled in the heart of Jharkhand, stands tall as a testament to the industrial might of the Vedanta Group. With a 95.49% stake, Vedanta's unwavering support forms the bedrock of ESL Steel's success. This robust backing translates into several advantages for the steelmaker: