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In our recent meeting with the management of Vedanta Ltd. it emphasized three important points:

capital allocation between capex, dividend and M&A,

net debt reduction at the parent company level; and

focus on volume growth and cost reduction on a sustainable basis.

Vedanta announced a capex policy with a focus on growth capex and dividend, while avoiding the inter-corporate deposit route to support the parent company. The company plans to allocate $1-1.5 billion annually to growth capex, which will result in:

a volume expansion,

cost reduction,

increase in the share of value-added products, and

improving environmental, social and governance standards.

Capex will likely continue to support these initiatives even during a recession.

Management plans to pay a ~$4 billion dividend over the next three years, which should help it deleverage at the parent company level.

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