Key facts
- Four Vedanta demerged entities—Aluminium, Power, Oil & Gas, and Iron & Steel—will list on BSE and NSE on Monday, June 15.
- Vedanta Aluminium is expected to debut with a market capitalization exceeding Rs 1.74 lakh crore.
- Analysts have provided fair value estimates for each of the four newly listed stocks.
- Vedanta's shares have already adjusted to the demerger, trading at Rs 309.65
Four companies spun off from Anil Agarwal's commodities conglomerate, Vedanta, are set to begin trading on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on Monday, June 15. Among these, Vedanta Aluminium Metal Limited (VAML) is anticipated to be the standout performer, drawing substantial investor interest and potentially the largest initial price surge.
Analysts view this restructuring as a significant event, with VAML positioned as the group's new "crown jewel." ICICI Securities has assigned VAML a sum-of-the-parts valuation of Rs 398 per share, a key component of their INR 855 target price for the combined entity. The brokerage is particularly bullish on the aluminium segment, citing potential supply deficits exacerbated by ongoing geopolitical conflicts.
VAML's investment case is built on its dominant domestic market share, estimated at 55-60%, and its first-quartile global cost position. The company plans to expand its primary aluminium capacity to 6 million tonnes per annum from its current 2.88 million tonnes. Its alumina capacity has been enhanced to 5 million tonnes per annum, bolstering cost competitiveness.
Despite carrying the most debt among the demerged entities, VAML is projected to generate the highest EBITDA, resulting in an attractive net debt to EBITDA ratio of approximately 1.3 times. Credit rating agency ICRA has upgraded VAML's long-term rating to AA+ with a stable outlook, noting firm LME aluminium prices and strong operational performance.
Near-term catalysts for VAML include potential inclusion in the Nifty Next 50 index, which could trigger passive inflows of around Rs 1,300 crore. It is also expected to be classified as a large-cap stock by AMFI, with an estimated free-float market capitalization of Rs 75,444 crore.
The broader Vedanta Group has also seen its credit profile improve, with a significant increase in base metal prices contributing to a strong OPBDITA. Adjusted net leverage at the group level has improved and is expected to moderate further. Vedanta Resources Limited, the parent company, also received a credit rating upgrade from Fitch.