Over 50 high-impact growth projects to help Vedanta achieve $10 bn Ebitda

Mining conglomerate Vedanta Group's strategic roadmap to a $10 billion near-term EBITDA will be powered by timely execution of over 50 high-impact growth projects, including those in zinc, aluminum, oil and gas and power businesses.

These projects are at an advanced stage of completion, according to a powerpoint presentation made to more than 45 fund managers and analysts, who were on a site visit organised by the Vedanta Group.

Vedanta's aluminum business has projects underway to achieve 3.1 million tonnes per annum of integrated supply.

It sits in the first quartile of the global cost curve, with the cost of production at multi-year lows -- $1,711 per tonne -- with a 100 per cent vertically integrated supply chain. The business has a 2x strong demand outlook with India's domestic market set to double every five years, it said.

Vedanta's zinc business produces 1.2 million tonnes of zinc metal at the cost of $1,000 per tonne while silver volumes are at 800 million tonnes a year. The business has 75 per cent-plus market share in India's primary zinc market and growth plan for 2 million tonnes is under development.

Similarly, Vedanta Group's oil and gas business is focusing on expanding its resource base to 2 billion barrels of oil equivalent in the next three years, with a production target of 300,000 barrels of oil equivalent per day, more than double of current levels, the presentation said.

Additionally, the Vedanta Group has major projects under execution that include capacity expansion at the Lanjigarh alumina refinery from 3.5-5 million tonnes, BALCO smelter from 0.6-1 million tonnes, and raising the overall power generation capacity from 2.9 GW to 5 GW.

Together, the Vedanta Group is investing around $8 billion in its ongoing growth projects, the presentation said.

Several leading brokerage houses have taken note of this, upgrading their target price for the company.

Upgrading Vedanta's price target to Rs 644, Nuvama in its report said, "We are raising FY25E/26E EBITDA by 5-6 per cent, factoring in operational efficiency, lower aluminium cost of production due to captive alumina and higher premiums for aluminium and zinc.

"Meanwhile, the approval by lenders shall allow for demerger of companies by end-FY25. We value Vedanta, ex-HZL at 6x FY26E EV/EBITDA (earlier 5.5x) and HZL at 7x FY26E EV/EBITDA, yielding a target price of Rs 644 (earlier Rs 542)."

Further, Investec upgraded the target price to Rs 473.

CLSA noted in its recent report that profitability improvement initiatives like major cost reductions via alumina refinery capacity expansion, higher power generation efficiency, commissioning coal blocks and bauxite mines will be key to a re-rating.

Vedanta's existing assets, along with the growth projects, will potentially generate $5 billion in free cash flows while contributing significantly to nation building through sustainable return to stakeholders.

The $10 billion near-term EBITDA includes $4.2 billion from aluminium, $2.7 bn from Zinc India (zinc and silver), and $0.9 billion from oil and gas.

The Group's plans make it well-positioned to capitalise on India's economic growth as the country's Gross Domestic Product (GDP) is expected to grow at a healthy rate, reaching $7 trillion by 2030.

The company has proposed a vertical split of the businesses and will list five additional entities on the stock exchanges, subject to receiving all regulatory approvals, by the end of this year.

As per the plan, for every one share of Vedanta Ltd, the existing shareholders will additionally receive one share of the five newly listed companies.

The demerger will create independent pure play companies in the aluminium, power, base metals, oil and gas and steel and ferrous, while zinc and other existing businesses will remain under Vedanta Ltd.