Vedanta Demerger: A New Chapter For Shareholders
The National Company Law Tribunal (NCLT) has approved Vedanta Limited’s demerger plan, paving the way for the creation of five separately listed entities. This move is expected to unlock significant value for shareholders, with Vedanta share price rising by 3.5% to an all-time high of Rs 569.
Demerger Plan: What You Need To Know
The demerger plan involves splitting Vedanta into five entities: Vedanta Aluminium, Vedanta Oil and Gas, Vedanta Power, Vedanta Iron and Steel, and a restructured Vedanta Limited. For every Vedanta share owned, investors will receive one share in each of the four new companies, with the parent company retaining its stake in Hindustan Zinc.
Brokerage Firm’s Outlook
Nuvama Research believes that the demerger could add around Rs 84 per share by eliminating the conglomerate discount. However, with the stock already up 28% this year, investors are faced with a dilemma: does this NCLT win create value, or is it just another step in a messy restructuring that may not deliver what is being promised?
Operational Challenges Ahead
The demerger may look simple on paper, but it creates operational headaches. Vedanta Aluminium runs one of India’s biggest aluminium operations, with record output in the September quarter. However, the company faces challenges such as reducing hot metal costs and managing power costs. Vedanta Oil and Gas will hold the company’s hydrocarbon assets, including the Rajasthan RJ block, but faces a dispute with the government over cost disallowances.
Rationale Behind The Demerger
The rationale behind the demerger is to reduce debt, sharpen management focus, and remove the conglomerate discount. The five entities will have dedicated management teams and transparent capital structures, aiming to attract sector-specific investors who have historically avoided Vedanta due to its diversified structure.
Challenges And Concerns
However, the company has already missed two demerger deadlines, and investors must contend with the reality that five smaller entities may have lower trading liquidity than a single large-cap stock. The petroleum ministry’s opposition was the most formidable obstacle Vedanta faced, and the NCLT’s decision to overrule those objections does not eliminate the underlying concerns.
Financial Performance
Vedanta delivered strong second-quarter results, with revenue of Rs 39,868 crore, up 5.4% year-on-year, and Ebitda of Rs 11,397 crore, up 14.9%. The management guided that fiscal 2026 would mark Vedanta’s strongest year ever, surpassing the previous record Ebitda of $6 billion in fiscal 2022.
Valuation And Outlook
The Rs 84 per share upside estimated by Nuvama Research is plausible if the demerger is executed smoothly, debt is allocated transparently, and commodity prices remain supportive. However, the stock trades at a forward price-to-earnings multiple of 11.4x, which is higher than its five-year average of 8.72x. Due to its elevated multiples, Dalal Street forecasts the Vedanta share price to remain rangebound over the next 12 months, given the consensus price target of Rs 572.