Vedanta Growth Driven by Integration, Expansion, Demerger

Equirus Wealth has set a target price of Rs 560 for Vedanta Limited, indicating a potential 18% upside on the company’s closing price of Rs 472.50 on December 05. It has initiated coverage on Vedanta with a buy rating.

The firm has noted in its report that Vedanta is driving growth and value through integration, expansion, and demerger. “Vedanta is executing a transformative growth strategy through vertical integration, expanding capacities, and a higher Value-Added Products (VAP) mix, expected to drive volume growth and EBITDA margin expansion,” Equirus said in its report.

The firm has highlighted Vedanta’s ongoing expansion plans and investment in strategic projects. It has noted that the company’s 9 MTPA Sijimali bauxite mine is progressing well, with the initial production set to commence in Q3 FY25. Along with the bauxite mine, expanded captive coal mines will enable Vedanta to secure low-cost raw materials, substantially helping it to reduce reliance on external suppliers, Equirus said in its report.

Vedanta’s investments in planned expansion plans are expected to benefit the company’s EBITDA growth. As per Equirus, the combined effects after the successful operationalization of the planned expansions are projected to elevate Vedanta’s EBITDA per tonne to USD 900-1,000. This will drive targeted annual EBITDA from the Aluminium segment to over $4 bn from $1.2 bn in FY24. Such initiatives will position Vedanta for sustained cost efficiencies and enhanced EBITDA margins, allowing it to navigate cyclical downturns more effectively and secure its position as a top-tier global Aluminium producer by FY30, the firm said in its report.

Equirus has said that Vedanta’s ongoing demerger will likely prompt a re-rating for the company as Vedanta gains the flexibility to invest based on individual commodity outlooks and business fundamentals.

“With NCLT approval anticipated by March 2025—now mostly procedural, as major stakeholder and lender consents are secured—the demerger is set to pave the way for sustainable, long-term growth across Vedanta’s portfolio, ultimately enhancing shareholder value and attracting sector-specific investments,” the firm said in its report. 

Vedanta has also received credit rating upgrades from two firms in last three months. CRISIL upgraded Vedanta’s long-term bank facilities and debt instruments to ‘AA’ from ‘AA-’ while reaffirming the short-term rating at A1+. In September, another credit agency—ICRA—upgraded Vedanta's long-term credit rating to AA from AA-, citing the company’s strengthened credit profile.