Shares of Vedanta’s newly demerged entities, including Vedanta Aluminium Metal, Vedanta Oil & Gas, Vedanta Iron and Steel, and Vedanta Power, experienced a rally of up to 5%, marking a second consecutive day of gains on Monday.
Vedanta Aluminium shares increased by 1.5% to reach a high of Rs 465, while Vedanta Oil & Gas hit its 5% upper circuit limit at Rs 34.70 on the BSE. Vedanta Power climbed over 3% to Rs 42.40, and Vedanta Iron and Steel was locked in a 5% upper circuit at Rs 26.80.
Last week, Citi initiated coverage on Vedanta Aluminium shares with a ‘Buy’ rating and set a target price of Rs 560 per share, identifying it as its top pick among Indian metals. This target indicates a potential upside of more than 22% from the stock’s previous closing price.
Citi highlighted several factors contributing to its positive outlook, including a favorable aluminium market, growth opportunities (such as Balco expansion and Vedanta Aluminium debottlenecking), cost efficiency (increased captive alumina, domestic bauxite, and captive coal), and improving leverage. The firm anticipates the company will achieve a net cash position by FY28.
Expecting aluminium prices to stabilize around $3,400 in FY27-28, Citi noted that every $100 per tonne shift in LME could affect the company’s EBITDA by 4-5.5%, impacting fair value by nearly Rs 30 per share. “We open a 90-D positive CW: Our commodities team believes the aluminium market is in deficit and will sharply reduce inventories over the next 3-6 months, driving prices up 15-20% to $4,000 per tonne in the base case,” they added.
Regarding Vedanta Oil & Gas, Sunny Agrawal, Head of Fundamental Research at SBI Securities, stated that it holds a fair value of Rs 42 per share.
Vedanta Oil & Gas, which includes Cairn Oil & Gas, positions itself as India’s leading private sector upstream player, aiming for a production target of 300,000 to 500,000 barrels per day through a planned $5 billion investment. “A little over a decade ago, Cairn was valued at $14.5 billion. When we acquired Cairn, its market capitalization was half of the asset value. Today, Cairn has grown significantly, adding more reserves and a natural gas portfolio,” the company stated in a press release earlier this year.
Brokerages have varying opinions on Vedanta Power’s valuations. Domestic brokerage Emkay estimates its value at approximately Rs 51.7 per share, while Kotak Institutional Equities values it at Rs 60 per share. Nuvama’s valuation suggests around Rs 47 per share, and CLSA estimates it at roughly Rs 35 per share.
The company boasts over 4 GW of installed power generation capacity across Punjab, Andhra Pradesh, Chhattisgarh, and Odisha, including assets like the Talwandi Sabo Thermal Plant, Meenakshi Energy, Sakti Power, and the Jharsuguda Thermal Plant.
Management aims to position itself among India’s top three private thermal power producers by FY33 through capacity expansion and asset improvements. The business also benefits from several long-term and medium-term power purchase agreements with state utilities, providing revenue visibility.
In terms of Vedanta Iron and Steel, the company’s share price has seen the most substantial gains among the four Vedanta Group companies, rising for a fifth consecutive session. Vedanta Iron & Steel operates in India and Africa, focusing on iron ore exploration, mining, and processing, while also producing high-quality steel, wire rods, TMT bars, pig iron, ductile iron (DI) pipes, ferro-silicon, cement, and metallurgical coke.
Sunny Agrawal remarked that Vedanta Iron & Steel presents cyclical upside but carries higher commodity and execution risks, especially given weaker listing traction and greater earnings volatility. Thus, on a forward SOTP basis, Aluminium stands out as a structural compounder with favorable operating leverage, while the others are more tactical or cyclical plays.
In April, Vedanta announced that each eligible shareholder would receive one share in each of the four companies—Vedanta Aluminium, Vedanta Power, Vedanta Oil & Gas, and Vedanta Iron & Steel—for every share held in Vedanta on the record date of May 1.
While Vedanta shares have already adjusted to the restructuring, investors awaited the listing of the four newly spun-off companies. The stocks are initially placed in the Trade-to-Trade (T2T) segment, where every transaction mandates compulsory delivery.
Disclaimer: Recommendations, suggestions, views, and opinions provided by the experts are their own and do not represent the views of The Economic Times.
