 "Vedanta nears record high on improved outlook; zooms 94% from March low")
Shares of Vedanta hit a fresh 14-year high of Rs 483.75, surging 5.5 per cent on the BSE in Tuesday’s intra-day trade on improved outlook. The stock is trading close to its record high of Rs 494.30 touched on April 8, 2010.
In past three trading days, it rallied 12 per cent after the company on May 16, declared first interim dividend of Rs 11 per equity share on face value of Re 1 per equity share for the financial year 2024-25. The company has fixed May 25, 2024 as the record date for the purpose of payment of dividend.
The board has also approved to raise funds up to Rs 8,500 crore by various financial instruments. Further, the company’s board also approved Investment in Vedanta Copper International Company (VCI) for setting up of continuous cast copper rod plant in kingdom of Saudi Arabia.
According to the company, it is in the process of establishing a state of the art copper rod manufacturing facility with a projected capacity of 125 KTPA in KSA. The company said this will enable it to explore more growth opportunities in new geographies. Post the investment, VCI shall become a direct wholly owned subsidiary of the company.
Meanwhile, with past three days rally, the stock price of Vedanta has bounced back 94 per cent from its March 2024 low of Rs 249.75.
Vedanta Group’s Chairman Anil Agarwal said that the group is aiming to invest USD 20 billion across all its businesses in India over the next four years. The investments will be focused on technology, electronics, and glass businesses apart from the other activities that the group is engaged in, PTI reported quoting Agarwal.
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Vedanta, a subsidiary of Vedanta Resources, is one of the world’s leading natural resources companies spanning across India, South Africa, Namibia, Liberia, UAE, Korea, Taiwan and Japan with significant operations in oil and gas, zinc, lead, silver, copper, iron ore, steel, nickel, aluminium, power and glass substrate and foraying into electronics and display glass manufacturing.
Meanwhile, the overall operating profitability (OPM) of Vedanta’s remained steady at 24.5 per cent in FY2024 (versus 23.9 per cent in FY2023) on the back of the improved cost of production and range-bound metal price movements.
In FY2025, the cost structure, especially in the aluminium business, is expected to improve, driven by the backward integration projects, and will support the overall operating profits. Metal prices had rallied in April 2024; unless negatively impacted by Chinese demand and other key consuming economies, the price rally would support the earnings in FY2025. The sales volume is expected to improve in the aluminium, zinc international and iron ore segments, ICRA said.
The ratings agency has placed the Vedanta’s instruments rating on watch with developing implications owing to the ongoing demerger of the company’s aluminium, oil and gas, power, base metal (zinc international and copper business) and iron and steel businesses into separate standalone listed entities, which is expected to be concluded by December 2024.
Vedanta is increasing the share of valued-added capacities in the aluminium segment to 2.6 mtpa from 1.5mtpa in the current fiscal, which is expected to increase the product premium over London Metal Exchange (LME) prices, going forward. Moreover, the ongoing vertical integration would result in lower cost of production in the medium term, generating better EBITDA/tonne in the segment. The zinc business is also supported by the low cost of production emanating from large high-quality mining reserves.
ICRA expects growth in demand for non-ferrous metals (viz.zinc, aluminium and copper) to remain healthy at 10 per cent in FY2025. While domestic demand may face some headwinds due to lower Government spending around the general elections in Q1FY2025, the overall demand is expected to pick up from Q2FY2025. The healthy demand is likely to support volume growth, the rating agency said in rationale.