Vedanta Hits 52-Week High as Demerger Plan Gets NCLT Nod

Vedanta Limited's stock has demonstrated significant upward momentum, reaching a new 52-week high of Rs 675.85. This rally is driven by a combination of strategic corporate actions and favorable market conditions, primarily the formal approval for its much-anticipated demerger. The positive sentiment is further bolstered by a strong upswing in commodity prices and optimistic outlooks from financial analysts, leading to a substantial increase in the company's market capitalization to approximately Rs 2,59,688 crore.

NCLT Approves Strategic Demerger

The principal catalyst for the recent surge in Vedanta's share price is the sanction granted by the National Company Law Tribunal (NCLT), Mumbai Bench, for the company's demerger scheme. This regulatory green light is a pivotal step in Vedanta's plan to restructure its diversified operations into several distinct, publicly listed companies. The objective is to create focused, 'pure-play' entities that can independently pursue growth and attract specialized investors.

The restructuring will separate core businesses into new listed companies, including Vedanta Aluminium, Vedanta Steel and Iron, Talwandi Sabo Power, and Malco Energy, which will house the oil and gas operations. The existing Vedanta Limited will retain the base metals business, including its significant stake in Hindustan Zinc.

Unlocking Shareholder Value

According to Chairman Anil Agarwal, this strategic overhaul is designed to unlock significant value for shareholders. By creating independent companies, each with its own board, capital structure, and investment strategy, Vedanta aims to eliminate the conglomerate discount that has historically affected its valuation. This structure is expected to provide investors with clearer, more direct investment opportunities in specific sectors like aluminium or oil and gas, potentially leading to a higher collective valuation for the group's assets.

Under the terms of the demerger, existing shareholders of Vedanta Limited will receive one share in each of the newly listed companies for every one share they currently hold. The company has set a target to complete this complex restructuring process by the end of the 2026 financial year.

Favorable Commodity Cycle Provides Tailwinds

Concurrent with the demerger news, Vedanta is benefiting from a robust commodity cycle. The most notable impact comes from the record rally in silver prices. Vedanta's subsidiary, Hindustan Zinc, is India's largest silver producer, and the surge in silver prices directly boosts its revenue and profitability. This has a positive cascading effect on Vedanta's consolidated financials, making the stock an attractive proxy for investors looking for exposure to the silver market.

Beyond silver, prices for other key non-ferrous metals, including aluminium and zinc, have also shown considerable strength. The rising demand for these metals is closely tied to the global energy transition, which requires substantial quantities for renewable energy infrastructure, electrification, and the manufacturing of electric vehicles. This broad-based commodity strength enhances Vedanta's margins and cash flow, reinforcing investor confidence.

Strong Market Performance

The market has responded positively to these developments, with Vedanta's stock delivering impressive returns. The sustained buying interest from both retail and institutional investors reflects growing confidence in the company's strategic direction.

Analyst Upgrades and Positive Outlook

The positive sentiment is shared by several brokerage firms, which have upgraded their ratings and price targets for Vedanta. Nuvama has issued a 'Buy' rating with a revised target price of Rs 806 per share, indicating a potential upside of around 18%. Similarly, Kotak Institutional Equities upgraded its rating to 'Buy' and raised its target price to Rs 650, citing the demerger as a key value-unlocking event. Analysts project that Vedanta's EBITDA and EPS could grow at a compound annual growth rate (CAGR) of 17% and 24%, respectively, from FY25 to FY28.

Ambitious Expansion Plans

Vedanta is also undertaking a significant capital expenditure program of approximately ₹81,743 crore ($10 billion) to expand its capacity across key businesses. A substantial portion of this investment is allocated to its aluminium and zinc operations, aligning with the increasing demand from sectors driving the energy transition. This capex is expected to fuel volume growth and enhance the company's earnings potential in the coming years.

Regarding its financial structure, the company has clarified that existing debt will be distributed among the demerged entities based on their respective cash-generating capabilities. This approach is intended to ensure a sustainable capital structure for each new company. Chairman Anil Agarwal has also reaffirmed the company's commitment to its dividend policy, which remains a key attraction for many investors.

Conclusion

Vedanta's recent performance is the result of a powerful convergence of strategic restructuring, favorable market conditions, and a clear growth roadmap. The NCLT's approval for the demerger is a landmark event that sets the stage for significant value unlocking. Coupled with a strong commodity cycle and ambitious expansion plans, the company has built a compelling narrative for investors. The market's focus will now shift to the successful execution of the demerger and the subsequent performance of the newly independent entities.