Vedanta's demerger concluded with mixed fortunes for its listed entities, with Vedanta Power and Oil & Gas shares tumbling nearly 3% each while Vedanta Aluminium Metal and Iron & Steel jumped up to 5% on Wednesday. According to The Economic Times, the company currently has a market capitalisation of more than ₹1.78 lakh crore, higher than its parent Vedanta whose market cap currently stands at nearly ₹1.1 lakh crore. Vedanta Power and Vedanta Iron & Steel shares are still trading above their listing prices, while Vedanta Aluminium and Vedanta Iron & Steel shares have slipped below the level at which they debuted on the stock market last week, concluding the final leg of Vedanta's mega demerger, which was one of India's biggest corporate restructurings in the metals and mining sector.
Citi has listed key drivers for its bullish call on Vedanta Aluminium, which include a positive aluminium outlook, growth potential through Balco expansion and Vedanta Aluminium debottlenecking, cost focus with higher captive alumina and domestic bauxite, and improving leverage. As reported by The Economic Times, Citi expects the company to have a net cash position by FY28. The brokerage expects aluminium prices to hover around $3,400 in FY27-28, with every $100 per tonne change in LME impacting the company's EBITDA by 4-5.5% and subsequently fair value by nearly ₹30 per share. Citi's commodities team believes the aluminium market is in deficit and will draw inventories sharply over the next 3-6 months, driving prices up 15-20% to $4,000 per tonne in the base case scenario.
Multiple brokerages have initiated bullish ratings on Vedanta Aluminium, with CLSA initiating coverage with an 'Outperform' rating and target price of ₹540, implying an upside potential of more than 18% from the stock's previous closing price. As reported by The Economic Times, CLSA's rating is supported by a higher for longer aluminium cycle and robust operational tailwinds. "We expect backward integration to lift the company into the first decile of the global cost curve, along with near term volume growth visibility. Strong FCF generation (even after assuming aluminium LME at a discount to spot) is likely to support deleveraging and dividend payout," CLSA added. Last week, Citi and Kotak Institutional Equities initiated coverage with 'Buy' ratings and target prices of ₹560 and ₹600 respectively, with international brokerage Citi naming the newly-listed stock its top Indian metals pick.
Vedanta Oil & Gas, which houses Cairn Oil & Gas, claims to be India's leading private sector upstream player and is targeting production of 300,000 to 500,000 barrels per day through a planned investment of $5 billion. According to the company's press release cited by The Economic Times, Cairn was valued at $14.5 billion a little over a decade ago, and when acquired, its market capitalisation was half of the asset value. Today, Cairn has grown manifold, adding more reserves as well as a natural gas portfolio. The company owns more than 4 GW of installed power generation capacity across Punjab, Andhra Pradesh, Chhattisgarh and Odisha. Its portfolio includes the Talwandi Sabo Thermal Plant, Meenakshi Energy, Sakti Power and the Jharsuguda Thermal Plant. Management has outlined plans to become one of India's top three private thermal power producers by FY33 through capacity expansion and asset turnarounds.
Vedanta Power owns more than 4 GW of installed power generation capacity across Punjab, Andhra Pradesh, Chhattisgarh and Odisha. As reported by The Economic Times, the company's portfolio includes the Talwandi Sabo Thermal Plant, Meenakshi Energy, Sakti Power and the Jharsuguda Thermal Plant. The business benefits from several long-term and medium-term power purchase agreements with state utilities, providing a degree of revenue visibility. However, Vedanta Power shares fell over 3% on Thursday, slipping below their listing price after debuting earlier this week following the Vedanta demerger. Analysts said the stock remains the most defensive among the four newly listed entities, supported by regulated returns, while advising investors to focus on business quality, sector cycles and execution outlook.
