INSUBCONTINENT EXCLUSIVE:
Over the past year, the stock has been eerily stagnant, inching up a mere 0.1% and underperforming not just the metal sector, but the
broader Nifty as well.While investors watching from the sidelines are left wondering what will finally ignite a breakout and if it is time
to buy, experts advise caution until the demerger mystery is resolved.Vaibhav Vidwani, Research Analyst at Bonanza attributes Vedanta's
insipid performance to key overhangs like high net debt of Rs 53,251 crore which restricts financial flexibility of the company thus keeping
investor sentiments cautious
Meanwhile, the much-anticipated demerger is creating delays for sector focused companies in his view."We would recommend the investor to buy
only if the demerger takes place as it will unlock value for the shareholders," Sunny Agrawal, Head - Retail Fundamental Desk at SBI
Securities told ETMarkets
The sentiments are echoed by expert Kranti Bathini who suggested a wait and watch strategy as there is a demerger overhang
The company suffered corporate governance issues in the past, he added.
Live EventsBathini said that the stock's popularity among investors
is owing to its high dividend yield.Vedanta is among the top 10 stocks with highest dividend yield
According to a note by SBI Securities, its dividend yield in FY24, FY23 and FY22 stood at 7%, 24.2% and 10.7%, respectively
Among the largecaps, Vedanta tops the chart with last 12 months yield of 7%, according to Axis Securities.Vedanta share price
performanceVedanta's price performance has been lackluster with six months returns at 2% against a 10% rally in the Nifty Metal index and 5%
in the Nifty.Though metal stocks have picked up in H1CY25, the sector suffered heavily in H2CY24 and that may have had a sentimental impact
on Vedanta shares as well.Most commodities including metals often mirror international price trends and the cyclical nature adds additional
variables in the performance of metal stocks.Tech viewNilesh Jain, Head Vice President, Equity Research Technical and Derivatives at Centrum
Broking does not find Vedanta's current proposition attractive on charts
In the absence of any clear trend, it is best to avoid the stock for now, Jain opined.Bulls have failed to unbolt despite a host of positive
triggers such as:1) Vedanta demergerIn March, Vedanta extended the deadline of the demerger of its businesses from March 31, 2025 to
September 30, 2025 citing pending approvals from government authorities and National Company Law Tribunal (NCLT)
The mining conglomerate is looking to demerge its businesses - aluminium, oil & gas, power and steel- as separate entities
At present, these businesses are subsumed within Vedanta Ltd, which is an Indian arm of UK-based Vedanta Resources
There will be no change in the overall shareholding structure.Post the demerger, every Vedanta shareholder - both retail and institutional -
will receive one new share in each of the newly demerged companies.Chairman Anil Agarwal in a letter to company shareholders had said that
he envisions each of the four newly demerged companies to potentially grow into a $100 billion company.Read More: Vedanta extends demerger
deadline till September 30, cites pending govt, NCLT approvals2) Operational performanceMetal major Vedanta posted strong operational
performance in Q1FY26 across its portfolio
The Lanjigarh Refinery reported a record quarterly alumina production of 587 kt, marking a 9% year-on-year and a 36% quarter-on-quarter
jump.Zinc India achieved its highest-ever Q1 mined metal production at 265 kt, up 1% YoY, while Zinc International output soared 50% YoY and
Ferro Chrome production surged 150% QoQ, supported by best-ever ore production, which climbed 66% QoQ
Additionally, power sales rose 11% QoQ, reflecting broad-based strength across segments.Read more: Vedanta Q1 Update: Alumina production up
9% YoY; zinc, ferro chrome hit new recordsThe mining major had reported stellar Q4FY25 earnings posting a 154% year-on-year rise in
consolidated net profit to Rs 3,483 crore while the revenue from operations grew 14% YoY to Rs 40,455 crore.3) Debt reductionVedanta has
been focusing on deleveraging push
CFO Ajay Goel in a company filing had said that Vedanta balance sheet deleveraged by $500 million in Q4 with a closing net Debt of $6.2
billion, enabling substantial improvement in leverage to 1.2x.4) Hindustan Zinc factorHindustan Zinc (HZL), a key profit driver for Vedanta,
plans to double its capacity to 2mt by the end of the decade from 1.1mt currently and the first step includes a 250kt zinc smelting
expansion at Debari with Rs120bn capex, targeting completion in 36 months, Emkay said in a note."Positioned in the lowest quartile of the
global zinc cost curve, HZ has 50% EBITDA margins
Management projects EBITDA of Rs 17,000 crore and free cash flow of Rs100bn for FY26E/27E, rising to Rs 20,000 post-expansion
Management remains positive on retaining mines due for re-auction in 2030 and plans to boost renewable energy share to 27% by FY26," this
brokerage said.It has taken a 'Buy' view on the counter for a price target of Rs 525.Bonanz's Vidwani has recommended a 'Buy' on Vedanta as
profitability will be supported by the price of silver (Hindustan Zinc) and aluminium, while the company's core business remains solid
"Expansion in both upstream and downstream in the aluminium industry, the Sijimali bauxite mine and backward integration for the aluminium
smelter will support revenue growth in the upcoming year," he added.5) Weak dollarDollar movement remains a critical component in company's
revenues and margins as commodities are dollar-linked.Agrawal of SBI Securities said that dollar index (DXY) below levels of 97 is positive
With Vedanta having most the of the base metals in its ambit, it is regarded as positive for it, he added
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own
These do not represent the views of Economic Times)
