Due primarily to improved cost control, Vedanta Ltd.’s Q2 earnings exceeded the consensus projections in terms of EBITDA by 11%. In terms of divisional earnings, copper, iron ore, and electricity were weaker, while aluminium, zinc, and oil and gas performed better. Analysts observed that Vedanta had reduced its FY25 volume projection for alumina, oil & gas, and ferrochrome, but left the capex guidance unaltered.
According to Vedanta management, the demerger process is proceeding according to plan and is nearing its conclusion, which is anticipated to be completed by March 2025. Additionally, it stated that companies that are about to decomming may separate from the group and list at various periods, contingent upon obtaining the necessary permits.
According to Emkay Global, it determined Vedanta’s SOTP equity valuation at Rs 2.8 lakh crore, indicating a 57% upside in potential value unlocking after the demerger. According to domestic broking, if the demerger happens, the projected timetables for backward integration in captive coal (over 30 mtpa), alumina (5 mtpa), and bauxite (9 mtpa potential) in FY26 might be revolutionary. The broking has maintained its ‘Buy’ recommendation on the stock for the time being, with a target price of Rs 600.
To account for the rise in metal prices, Emkay Global said it has increased its short-term commodity pricing projections. In the medium term, it anticipates a stable price environment for zinc and aluminium. “Incorporating the Q2 results and marking-to-market for higher commodity prices results in modest upgrades to our estimates, to the tune of 1-4 per cent for FY25E-27E,” it stated. In contrast to the Rs 915 crore loss in the same period last year, the Anil Agarwal-led company announced a net profit of Rs 5,603 crore for the September quarter on Friday. Revenue increased 10% year over year to Rs 37,171 crore from Rs 33,738 crore.
According to Vedanta, the demerger process is nearing completion and is on course. Meetings with creditors and shareholders are planned for the upcoming months. Through a $400 million Hindustan Zinc (HZL) offer for sale (OFS) and a $1 billion QIP, Vedanta recently raised $1.4 billion. At the same time, Vedanta management reported that it has lowered the holding company’s debt to $4.8 billion, the lowest amount in ten years, through the issuing of $1.2 billion VRL bonds and further deleveraging.
It stated, “This puts us in a strong position to create long-term value for our stakeholders, both now and in the years to come.” Vedanta is somewhat protected from the recent surge in alumina pricing because it obtained 60% of its external alumina at LME-linked rates through long-term supply contracts. Train 1 of the Lanjigarh Alumina Refinery extension was put into service, while train 2 is scheduled to be put into service in Q3FY25, bringing the entire capacity to 5 mtpa. In FY26, the management indicated an alumina production run rate of 4 mtpa.
