Vedanta Demerger 2026: Stock Rallies 35% on NCLT Approval

Introduction to Vedanta's Strategic Overhaul

Vedanta Ltd., a leading diversified metals and mining company, is moving forward with a significant corporate restructuring. The company has received approval from the National Company Law Tribunal (NCLT) for its plan to demerge into five separate, sector-specific listed entities. This strategic move, targeted for completion by March 2026, is designed to unlock value for shareholders and create focused businesses poised for independent growth. The market has responded positively to the development, with Vedanta's stock price surging over 35% year-to-date and reaching a new 52-week high.

The Demerger Plan Explained

The approved demerger will split Vedanta's diverse operations into five distinct companies. Shareholders of the current Vedanta Ltd. will receive one equity share in each of the four newly listed entities for every one share they hold in the parent company. This ensures that existing investors retain their ownership across the new, more focused businesses. The parent company, Vedanta Ltd., will continue to be listed and will primarily house its significant stake in Hindustan Zinc Limited, while also incubating new and future-facing business ventures.

The Five New Entities

The restructuring will result in the following five publicly traded companies:

1. Vedanta Aluminium: This entity will operate as a fully integrated global aluminium producer, focusing on cost competitiveness and expanding its portfolio of value-added and low-carbon aluminium products.
2. Vedanta Oil & Gas: As India's largest private oil and gas exploration and production company, this firm will concentrate on enhancing domestic energy security through technology-driven resource development.
3. Vedanta Power: This company will manage the existing independent power generation assets and explore new opportunities within India's evolving energy market.
4. Vedanta Iron & Steel: This entity will combine the company's iron ore, steel, and value-added ferrous operations into a vertically integrated platform, with plans for downstream expansion and green steel initiatives.
5. Vedanta Limited (Residual): The existing entity will continue to hold the company's stake in Hindustan Zinc and serve as an incubator for emerging businesses.

Rationale Behind the Split

Vedanta Group Chairman Anil Agarwal explained that the demerger aligns with the global model of large resource companies operating as pure-play entities. The primary goal is to unlock the full growth potential of each business segment. Agarwal envisions each of the new companies growing to the scale of the current Vedanta, effectively creating five major corporations from one. This structure is expected to provide investors with direct exposure to high-quality, sector-leading assets and allow each business to pursue its own strategic goals and capital allocation policies independently.

Market Performance and Stock Rally

Investor confidence in the demerger strategy is evident in Vedanta's stock performance. As of December 26, the stock closed at Rs 601.10 per share, having touched a new 52-week high of Rs 607.65 during the session. The stock has delivered impressive returns across various timeframes.

This sustained rally reflects the market's optimism about the value-unlocking potential of the demerger and the strong outlook for the commodities sector.

Analyst Views and Price Targets

Following the NCLT approval, several brokerage firms have expressed a bullish outlook on Vedanta. Kotak Institutional Equities upgraded its rating to 'Buy' and raised its target price to Rs 650 per share, citing buoyant commodity prices and strong earnings growth potential. The brokerage estimates Vedanta's EBITDA and EPS to grow at a CAGR of 17% and 24%, respectively, from FY25 to FY28. Similarly, ICICI Direct and Emkay Global have set target prices of Rs 650 and Rs 625, respectively. Analysts believe the demerger will allow high-growth businesses like aluminium and power to command better valuations than they would within a conglomerate structure.

Financial Health and Future Outlook

Addressing concerns about the company's debt, Anil Agarwal stated that the existing net debt of approximately Rs 48,000 crore will be allocated among the demerged entities based on their respective cash flows, a level he described as manageable. He also reaffirmed the company's commitment to aggressive capital expenditure, with a planned investment of $10 billion over the next four to five years across its businesses. Furthermore, Agarwal emphasized that dividend payouts, a key component of shareholder returns, will continue post-demerger, stating that "dividend is in my blood."

Conclusion

Vedanta's demerger is a transformative step aimed at creating a portfolio of independent, pure-play companies. With NCLT approval secured, the company is now in the execution phase, targeting completion by March 2026. The move has been well-received by the market, driving the stock to new highs and earning positive ratings from analysts. As the demerger progresses, investors will be watching closely to see if the five new entities can deliver on their promise of focused growth and enhanced shareholder value.