Vedanta's Demerger Plan in Focus as Shareholder, Creditor Meetings Held
18th Feb 2025
Vedanta's Demerger Plan and Proposed Structure
Shares of Vedanta Ltd are in focus today as the company board meets equity shareholders, secured creditors and unsecured creditors, regarding the demerger of the Anil Agarwal company's diversified businesses. The proposed demerger will create independent companies housing aluminium, oil & gas, power steel and ferrous materials, and base metals businesses under the name of Vedanta Ltd, Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Base Metals, Vedanta Steel and Ferrous Materials and Vedanta Power. Shareholders of Vedanta would receive one equity share each of the 5 newly listed companies for every one share of Vedanta they held. The approval from stock exchanges has already been received, and the meeting today with shareholders and creditors would seek final approval of the demerger.
Key Financial and Operational Updates
Vedanta's net debt excluding Hindustan Zinc increased 3% sequentially to Rs 69,500 crore in the December quarter, but is expected to fall to Rs 60,500 crore by end-FY26. The company's average interest rate has been managed at less than 10% in H2FY26 against 13.3% earlier, with the debt maturity extending to FY34. The Vedanta management recently suggested that alumina cost may have peaked in the December quarter and major benefits of lower alumina price and higher contribution of captive alumina should reflect from June quarter.
Analyst Outlook and Valuation
Analysts said Vedanta's December quarter performance was largely in line across segments, adding that capex plans were progressing well and could soon lead to further cost savings. The company management is targeting to maintain strong growth in earnings, led by the upcoming capacity that would produce higher VAP products. Vedanta stayed firm on its deleveraging plans, and higher cash flows will support both its expansion plan and deleveraging efforts. The stock currently trades at 4.9 times FY27E EV/Ebitda, and analysts maintain a Neutral rating with a SoTP-based target price of Rs 500.
Shares of Vedanta Ltd are in focus today as the company board meets equity shareholders, secured creditors and unsecured creditors, regarding the demerger of the Anil Agarwal company's diversified businesses. The proposed demerger will create independent companies housing aluminium, oil & gas, power steel and ferrous materials, and base metals businesses under the name of Vedanta Ltd, Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Base Metals, Vedanta Steel and Ferrous Materials and Vedanta Power. Shareholders of Vedanta would receive one equity share each of the 5 newly listed companies for every one share of Vedanta they held. The approval from stock exchanges has already been received, and the meeting today with shareholders and creditors would seek final approval of the demerger.
Key Financial and Operational Updates
Vedanta's net debt excluding Hindustan Zinc increased 3% sequentially to Rs 69,500 crore in the December quarter, but is expected to fall to Rs 60,500 crore by end-FY26. The company's average interest rate has been managed at less than 10% in H2FY26 against 13.3% earlier, with the debt maturity extending to FY34. The Vedanta management recently suggested that alumina cost may have peaked in the December quarter and major benefits of lower alumina price and higher contribution of captive alumina should reflect from June quarter.
Analyst Outlook and Valuation
Analysts said Vedanta's December quarter performance was largely in line across segments, adding that capex plans were progressing well and could soon lead to further cost savings. The company management is targeting to maintain strong growth in earnings, led by the upcoming capacity that would produce higher VAP products. Vedanta stayed firm on its deleveraging plans, and higher cash flows will support both its expansion plan and deleveraging efforts. The stock currently trades at 4.9 times FY27E EV/Ebitda, and analysts maintain a Neutral rating with a SoTP-based target price of Rs 500.