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Positive Start for Vedanta Limited Share Price
Vedanta Limited Share Price has increased over 4% during early trading on Tuesday following the company’s approval of a major restructuring plan. The restructuring involves the demerger of its diversified business into six separate listed companies. As a result, Vedanta shares saw a significant gain, rising as much as 4.95% to ₹233.60 per share on the BSE.
Six Separate Listed Companies
Six Separate Listed CompaniesUnder the proposed demerger, the existing company will be divided into six distinct entities: Vedanta Aluminum, Vedanta Oil and Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals, and Vedanta Ltd. Shareholders will receive one additional share in each of these newly listed entities for each share held in Vedanta. The demerger and listing process for these separate business units is expected to take approximately 12-15 months, subject to obtaining all necessary approvals.
Unlocking Value and Attracting Investment of Vedanta Limited Share Price
Analysts have expressed optimism about the demerger, believing that it will unlock shareholder value, attract strategic investments, and enhance competencies. Vikash Singh, a Research Analyst at Phillip Capital, stated that this move will offer flexibility to the group, unlock value for investors, and provide the parent company with options for managing its debt repayments. As a result, Vedanta’s stock was upgraded to “Buy” by Singh, with an unchanged target price of ₹290 per share. Kunal Kothari, a Research Analyst specializing in Metals & Mining at Centrum Broking, also views the demerger as a positive step towards unlocking future value for investors and maintains a “Buy” rating on the stock with a target price of ₹273 per share.
Debt Concerns Persist
While the demerger is seen as a means to simplify the corporate structure, enhance risk management, ensure autonomy and improve transparency. Concerns regarding debt persist for both Vedanta and its holding company. Vedanta Resources Ltd, the parent company, faces significant challenges in managing its debt maturities, with repayments totaling $1.3 – 1.4 billion in the next six months. Including $1 billion in bond payments due in January 2024. Additionally, it faces around $3 billion in repayments in FY25, plus interest servicing requirements.
Analysts at Motilal Oswal Financial Services highlight the importance of monitoring developments related to the company’s debt. Kotak Institutional Equities emphasizes Vedanta Resources Ltd’s high leverage and funding gap of $3 billion in FY2025E as key concerns. They believe that hefty dividends similar to those in FY2022-23 are no longer sustainable, and divestment of stakes in Vedanta or individual businesses is needed for deleveraging. The demerger, while helpful, is unlikely to unlock value on its own.
From 9:20 am, Vedanta shares were trading 2.13% higher at ₹227.25 per share on the BSE. At 11.26 am the shares were tradings 4.95% higher at ₹233.60 per share.
(Note: Stock prices and financial information are subject to change and may not reflect the current market conditions.)
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