
Anil Agarwal-owned Vedanta Ltd. has announced revisions to its previously proposed demerger scheme. It has decided to retain its base metals company within Vedanta Ltd. Initially, Vedanta had proposed the demerger into six pure-play companies —Vedanta, Vedanta Aluminium, Vedanta Power, Vedanta Oil & Gas, Vedanta Base Metals and Vedanta Iron and Steel— to enhance value unlocking.
The metals and mining giant has cited its ongoing exploration of alternative avenues for restarting the Tuticorin copper smelter (non-operational) as the reason behind its revised decision, while also mentioning that lenders believe the scheme would be more favorable for unlocking value and for overall optimal balancing of debt allocation.
Vedanta plans to complete the demerger process in January 2025, with share entitlement ratio of 1:1 for all its companies.
Brokerage firm Emkay Global, which has a ‘Buy’ rating and a price target of ₹600 on Vedanta, said that the tweaked demerger plan may ease the lender’s approval process.
“We understand that retaining the Tuticorin copper smelter in Vedanta Ltd would ease the lender approval process and fast-track the demerger process, with completion expected in January 25. Our estimates change marginally due to housekeeping changes,” it stated.
Emkay had argued that Vedanta’s proposed demerger to split the group into six pure-play companies focusing on the exposed commodity would open up a case for re-rating, as investors would take exposure based on the outlook for that particular commodity, cycles, and business fundamentals without taking exposure to other commodities attached as part of the diversified group.
“We have a view that Vedanta Limited, Vedanta Aluminium, and Vedanta Power are the businesses that we would like to own through-cycle,” the brokerage said.
At current valuations, investors are paying for Vedanta Ltd and Vedanta Aluminium, with the rest of the to-be-demerged stocks largely coming for free, according to Emkay’s estimates.
The Vedanta stock, currently trading at 5.1 times estimated FY26 EV/Ebitda, could potentially re-rate to 7 times on full value unlocking, as per Emkay. This would imply 45% upside potential via demerger with a market capitalisation of ₹2.7 lakh crore again the current market cap of ₹1.9 lakh crore, it said.
Out of the 15 analysts that have coverage on Vedanta, nine of them have a ‘Buy’ rating on the counter, five say ‘Hold’ and one has a ‘Sell’ rating on the stock.
Shares of Vedanta Ltd. opened over a percent higher on Monday and were trading at ₹484.30. The stock has risen over 87% so far in 2024.
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