Vedanta demerger watch: Emkay sees Rs 625 target

Vedanta share price in focus as demerger talk returns

Vedanta Ltd shares are in focus after a fresh round of commentary around the group’s demerger plans and the earnings outlook for its key subsidiary, Hindustan Zinc Ltd (HZL). Brokerage Emkay Global reiterated its ‘Buy’ stance on Vedanta, pointing to long-term growth visibility across the portfolio and a supportive outlook for zinc and silver. Separately, Vedanta CEO Arun Misra told CNBC-TV18 that the company is re-looking at the proposal to demerge its business. He also indicated that some groundwork for a Hindustan Zinc demerger could begin in FY27, though the immediate priority remains the broader Vedanta Ltd demerger.

The market’s attention is largely on how the post-demerger structure will look and how cash flows will be supported. Emkay’s thesis leans heavily on Hindustan Zinc as the operational and financial anchor, supported by cost competitiveness and long reserve life. The management’s updated commentary has also put silver back at the centre of investor focus, with guidance and pricing assumptions suggesting meaningful sensitivity to the metal’s trajectory.

Emkay reiterates ‘Buy’ and flags key monitorables

Emkay Global said that post-demerger, Vedanta Limited’s operational growth pipelines across Zinc India, Zinc International, Copper, FACOR (ferro alloys), and the Nickel vertical will remain key monitorables. The brokerage reiterated that steady earnings contribution from Hindustan Zinc is expected to underpin performance in the new structure. It also pointed to disciplined capital management and improving operational metrics as factors that can support investor confidence.

A recent equity stake sale was referenced in this context. The group’s 1.7% equity stake sale was described as strategically executed to fund near-term debt obligations. While the note does not quantify debt due, it frames the transaction as a liquidity management step rather than a growth capital raise.

Emkay also highlighted operational durability at Hindustan Zinc, citing mine life visibility at key assets. Mine life safety is described as secured through long-term reserve visibility, stretching through CY49 at Sindesar Khurd and CY30 at Rampura Agucha, with Rampura Agucha backed by a right of first refusal upon upcoming state re-auctions.

Hindustan Zinc’s role in Vedanta’s earnings mix

The brokerage positioned Hindustan Zinc as the “absolute financial and operational anchor” for the consolidated entity, supported by an industry-leading cost structure and long asset reserve life. Emkay noted that Hindustan Zinc contributes approximately 40% to Vedanta’s consolidated EBITDA, underlining why HZL’s operating outcomes can influence Vedanta’s consolidated earnings profile.

Emkay’s modelling also quantifies how EBITDA concentration could look under certain commodity assumptions. Based on forward FY28 commodity models of zinc at USD 3,000 per tonne and silver at USD 65 per ounce, HZL is estimated to deliver EBITDA of Rs 26,900 crore. Under that scenario, HZL is said to contribute 47% of consolidated revenues but 87% of Vedanta’s absolute consolidated EBITDA.

CEO comments: Hindustan Zinc demerger back on agenda, not immediate

CEO Arun Misra told CNBC-TV18 the company is re-looking at the proposal to demerge its business, though the immediate focus remains on the broader Vedanta Ltd demerger. He added that some groundwork on the Hindustan Zinc demerger could begin in FY27, suggesting the discussion has returned to the strategic agenda.

Hindustan Zinc had earlier proposed a demerger of its zinc, lead, silver and recycling businesses. That plan faced resistance from the government in 2024, which questioned its benefits to shareholders. The proposal is now being revisited, but management has made it clear that priority remains on the ongoing restructuring at Vedanta Ltd, the promoter and majority shareholder of Hindustan Zinc.

Under Vedanta’s demerger plan, the parent will retain its stake in Hindustan Zinc. Any potential split in Hindustan Zinc is described as a subsequent, second-stage restructuring exercise rather than an immediate move.

Timeline: Vedanta demerger completion targeted by March 2026

Emkay noted that Vedanta Ltd’s demerger is set to take three to four months post-regulatory approval, targeting completion by March 2026. The note also said NCLT approval has addressed previous government concerns. This timeline matters because management has linked any deeper work on a Hindustan Zinc split to progress on the larger Vedanta restructuring.

Silver becomes the headline variable for FY27

Management outlined a strong outlook for the silver business, stating it is expected to contribute around 50% of EBITDA going forward. It also expects silver markets to remain in deficit for the next one to two years amid rising demand across segments.

On volumes, the company targets silver sales volume of 680 tonnes in FY27 versus 627 tonnes in FY26. In a separate guidance reference cited by Emkay, management projected silver output of around 700 tonnes in FY27. Management also indicated that the “new normal” price range for silver has shifted to USD 55-75 per ounce from the earlier USD 35-45 range.

Zinc outlook and cost pressures: range-bound prices, higher unit costs

On base metals, management expects zinc prices to remain in the range of USD 3,100-3,300 per tonne and said the focus is on increasing zinc output relative to lead. Cost pressures remain a key monitorable. Production costs were indicated at around USD 1,000 per tonne, up by about USD 25 per tonne due to global factors.

Management added that operating leverage and higher renewable energy usage are expected to help contain costs. Emkay also framed renewables as a structural cost lever, with renewable energy usage targeted to rise from 7% in FY25 to 55% by FY27 and 70% by FY28.

Emkay’s numbers: FY27 output, EBITDA estimates, and sensitivity to silver

Emkay said Hindustan Zinc management guided for FY27 zinc production of at least 1,080 kilotonnes, alongside silver output expected to be around 700 tonnes. It also noted that minimal hedging for FY27 indicates management’s confidence in structurally tight silver supply, allowing for price-led upside.

At current spot prices, Emkay estimated Hindustan Zinc’s EBITDA at Rs 25,800 crore versus consensus forecasts of roughly Rs 22,000 crore, implying a potential upgrade of nearly 17%. The brokerage added a sensitivity marker: for every USD 1 per ounce move in silver prices, EBITDA could be affected by approximately 1%.

Key data points at a glance

Market impact: what investors are watching

The sharp move in the stock, referenced alongside the CEO’s comments, reflects how sensitive market sentiment is to clarity on the demerger roadmap and the cash flow profile of the post-demerger entities. The stated intention to keep Vedanta’s stake in Hindustan Zinc preserves the economic linkage between the two in the first stage of restructuring. That linkage is important because Emkay and management both emphasise HZL’s role as a significant EBITDA contributor.

Silver adds a second layer of market focus. With management asserting that about 50% of EBITDA could come from silver going forward, investors are likely to track realised prices, hedging levels for FY27, and execution on volume targets. At the same time, the zinc price range and higher unit costs highlight that operational efficiency and energy mix will remain central to margins.

Analysis: why the HZL story shapes the Vedanta narrative

The central analytical point in Emkay’s thesis is concentration of earnings quality. Hindustan Zinc’s long reserve life at key mines, cost positioning, and stated renewables ramp offer a framework for durable cash flows. That durability is why the brokerage refers to HZL as an anchor for the consolidated entity, and why any later discussion on a Hindustan Zinc split is likely to be evaluated through the lens of shareholder value and control considerations.

The second point is commodity leverage. Emkay’s estimate of Rs 25,800 crore EBITDA at current spot, versus consensus at about Rs 22,000 crore, shows how rapidly earnings expectations can move when silver assumptions change. The stated 1% EBITDA sensitivity to each USD 1 per ounce move in silver prices quantifies that leverage and helps explain why both Vedanta and Hindustan Zinc can react sharply when silver moves.

Conclusion

Vedanta is back in focus as Emkay reiterates a ‘Buy’ with a Rs 625 target and management signals that a Hindustan Zinc demerger could return to active discussion after the main Vedanta restructuring progresses. For now, the stated priority remains completing the Vedanta demerger, targeted by March 2026, while investors track FY27 zinc and silver guidance, cost trends, and the company’s renewables transition.