- Business Delivery, Demerger and Deleveraging driving the stock rally
- Stock traded above Rs 300 during the trading session on April 02
Shares of Vedanta Limited hit a 52 week high of Rs 301.95 (NSE) during trading session on April 02 on the back of the proposed demerger, rally in the global metal prices and the deleveraging steps at the conglomerate. Vedanta’s stock gained more than 4.5%, closing at Rs 300.85 (NSE) creating a nearly 10% gain since March 26.
Vedanta’s rally is in line with the strength in global metal prices that are soaring due to multiple factors. Strong industrial data from China indicated an expansion in the manufacturing activity for the first time in six months. As China is the largest consumer of multiple metals, the strong economic data has led to a rally in metal stocks including Vedanta, a leading producer and supplier of iron ore, steel, copper and aluminium.
The rally is a reflection of the overall business potential and EBITDA projections of the company. Vedanta is expected to clock nearly $5 billion of EBIDTA in FY24 (April 2023 to March 2024). Similarly, the Vedanta Group is eyeing an EBIDTA of $6 billion in the next financial year (FY 25) and scaling it to $7-7.5 billion in the following year on the back of operational efficiencies across businesses.
The company is also on track for the demerger of its key businesses, including aluminum, into separate listed companies and allocation of debt across the demerged entities that would be done in proportion to their assets, sources had said.
Vedanta had earlier said that it plans to deleverage debt by $3 bn over 3 years, and that its promoter entity – Vedanta Resources – does not foresee a rollover of its debt.
“Deleveraging is our priority. We would be deleveraging the debt of Vedanta Resources by $3 billion over the next three years. VEDL’s cash flow pre-growth capex is estimated to be $3.5-4 billion for financial year 2025, sufficient for secured debt maturities of $1.5 billion,’’ said Mr. Navin Agarwal, Vice Chairman, VEDL and member of Promoter Group at a recently concluded analysts’ meet, according to analysts who attended the meeting.
In September last year, Vedanta announced the creation of demerger of metals, power, aluminium, and oil and gas businesses to unlock potential value. After the exercise, six independent verticals – Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Limited – will be created.
For every share of Vedanta, shareholders will receive one share of each of the five newly listed companies. After the demerger, the businesses of Hindustan Zinc as well as the electronics business will remain with Vedanta Limited.
