Billionaire Anil Agarwal-backed Vedanta Ltd's stock price will trend this week due to its ex-dividend date for the fourth interim dividend of Rs 8.85 per share. The metal giant has the highest dividend yield in the sector and in the large-cap basket, outperforming major PSUs like Coal India and others. Also, the stock will be in focus this week due to its latest tweaking in much-awaited demerger plan. Vedanta stock is recommended to buy owing to its positive growth and value outlook through integration, expansion, and demerger.
Vedanta Ltd Share Price:
Last week, on December 20th, the stock ended at Rs 477.50 apiece, down by 2.99% on BSE, with a market cap of Rs 1,86,721.03 crore. The stock's 52-week high and low are Rs 527 apiece and Rs 249.30 apiece, respectively.
YTD, the stock has zoomed by nearly 24% on the BSE. Its price-to-equity ratio is 10.41x, while its return on equity is 23.80%.
Vedanta Ltd Dividend:
After months of delay, Vedanta finally announced its fourth interim dividend of Rs 8.85 per share with the face value of Rs 1 each for FY25. The dividend payout is to the tune of Rs 3,324 crore. The record date for the purpose of payment of the dividend shall be Tuesday, December 24, 2024, and the interim dividend shall be duly paid within the stipulated timelines as prescribed under law.
Earlier, Vedanta paid a third interim dividend of Rs 20 per share and its ex-date was on September 10, followed by a second interim dividend of Rs 4 per share with an ex-date on August 2, 2024. Meanwhile, the first interim dividend is about Rs 11 per share with ex-date on May 24, 2024.
Since July 2001, Vedanta has delivered about 46 dividends, as per Trendlyne data. The stock has paid up to Rs 46 per share dividends in 12 months. At the current market price, it has a dividend yield of 9.64%.
Vedanta Demerger Update:
As per the regulatory filing, Vedanta is in the process of issuing the notice to convene requisite meetings of its Equity Shareholders, Secured Creditors and Unsecured Creditors and is liaising with the stakeholders concerned. During management's discussions and deliberations with stakeholders (including lenders) concerning the Scheme, the following has emerged:
- A demerger of the Vedanta Base Metals undertaking may be considered at a stage when the Base Metals business evolves and matures to realize the full value potential of such demerger for shareholders;
- Lenders believe the Scheme would be more favourable for unlocking value and overall optimal balancing of debt allocation across residual Vedanta and resulting companies if the Vedanta Base Metals undertaking is retained in residual Vedanta itself;
- Given Vedanta is exploring alternative avenues for restarting the copper business (at Thoothukudi, Tamil Nadu), which is an integral part of the Base Metals undertaking, Vedanta should proceed with the Scheme, without implementing Part V about demerger of Vedanta Base Metals undertaking;
- The non-implementation of the demerger of the Base Metals undertaking and retaining the same in Vedanta will not affect the overall value creation as envisioned. The shareholders will continue to enjoy value unlocking of the Vedanta Base Metals business as part of legacy residual Vedanta where they will remain shareholders in addition to receiving equivalent shares in other resulting companies which will mirror Vedanta shareholding. The shareholders' beneficial interests in the overall value of Vedanta and resulting companies will remain unaffected.
That being said, Vedanta has decided to not demerger its base metals base metal unit. It said, "The non-implementation of the Base Metals undertaking any other Parts of the Scheme in relation to demerger of (a) Aluminium Undertaking (as defined under the Scheme); (b) the Merchant Power Undertaking (as defined under the Scheme); (c) the Oil and Gas Undertaking (as defined under the Scheme); and (d) the Iron Ore Undertaking (as defined under the Scheme), in any manner. All key terms as originally envisaged under the Scheme including concerning share entitlement ratio shall remain unaffected."
With the latest revision in the demerger, brokerage Emkay Global stated that the revised scheme of arrangement could ease the lender's approval process and fast-track the demerger process. The brokerage expects the demerger to be completed in January 2025. Hence, Emkay has changed its estimate on Vedanta marginally to a target price of Rs 600.
Vedanta NCDs:
Apart from this, Vedanta also announced that it has made timely payment of interest to its debenture holders. The payment was made on December 21, 2024, for its Secured Unrated Unlisted Redeemable Non-Convertible Debentures of face value Rs 1,00,000/- each aggregating up to Rs 3,400 crore.
Vedanta Recommendations:
According to Equirus Wealth, Vedanta Ltd. prioritizes dividends to aid parent VRL in reducing its USD 5.5 bn debt by USD 3 bn in three years. With a 1.49x net debt-to-EBITDA ratio as of September 2024, Vedanta leads the industry in liquidity. Over three years, it expects a cumulative of $20 bn EBITDA and $7-8 bn cash flow, supporting capex, dividends, and gradual deleveraging for Vedanta.
Before the pre-revised demerger plan, Equirus believed that Vedanta's market cap could reach Rs 3 trillion post-demerger of units.
Furthermore, the Equirus note highlighted that Cairn, with 1.4 bn barrels of oil equivalent (Mmboe) in reserves, aims to expand its resource base to 2 bn barrels in three years. Production is set to rise from 128,000 boepd in FY24 to 300,000 boepd by FY30, targeting 150,000 boepd by FY27, supporting Vedanta's goal to meet 50% of India's O&G demand by FY30. Enhanced Oil Recovery (EOR) techniques have boosted recovery from 33% to 41%, with a 60% target. A strategic shift to Revenue Sharing Contracts (RSC) will drive margins, with a target of 40% production from RSC blocks in long term. Cairn expects over $1 bn annual EBITDA from O&G operations.
Moreover, Equirus also expects VEDL's 9 MTPA Sijimali bauxite mine to commence production in Q3 FY25, complemented by captive coal expansion to 40 MTPA by H1 FY26, ensuring low-cost raw materials for its Aluminium smelters. The Lanjigarh alumina refinery's capacity is increasing from 2 MTPA to 5 MTPA by Q3FY25, with further debottlenecking to 6 MTPA by FY26. Smelting capacity will grow from 2.4 MTPA to 3.1 MTPA by FY27, supported by the 414 KTPA BALCO expansion by H2 FY25. Value-added product (VAP) share is set to rise from 61% to 90%. Post successful operationalization of these initiatives, they are projected to boost Aluminium EBITDA to $4 bn annually, with $900-1,000 EBITDA per tonne.
"We Initiate coverage on the stock with BUY rating and Mar'26 TP of Rs. 560 set at 5.5x Mar'27E Consolidated EBITDA ex-Hindustan Zinc (HZ) & 7x Mar'27E HZ EBITDA." Equirus added.
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