Vedanta Target Price Hiked to ₹806 by Nuvama on Demerger Hopes

Introduction

Vedanta Ltd's shares experienced a significant surge on Wednesday, climbing 3.32% to close at Rs 658.25 after Nuvama Institutional Equities revised its target price for the mining and metals conglomerate. The brokerage raised its forecast to Rs 806 per share, a substantial increase from the previous target of Rs 686. This optimistic revision is anchored in the anticipated value unlocking from the company's impending demerger, a sustained rally in global commodity prices, and expectations of strong earnings growth. The positive sentiment pushed the stock to a fresh high of Rs 673 during the session, elevating its market capitalisation to Rs 2.5 lakh crore.

The Catalyst: Nuvama's Upgraded Forecast

Nuvama Institutional Equities has maintained Vedanta as a top pick, reinforcing its 'buy' rating with its highest-ever price target for the company. The brokerage's confidence stems from a detailed analysis based on a sum-of-the-parts (SOTP) framework for FY28. The report highlights that the demerger, which is nearing completion, will be a primary driver for unlocking shareholder value. In line with this outlook, Nuvama has revised its EBITDA estimates for Vedanta, increasing them by 17% for FY27 and 8% for FY28. The firm projects a robust 20% compounded annual growth rate (CAGR) in EBITDA between FY25 and FY28, forecasting it to reach Rs 724 billion.

Underlying Assumptions: A Bullish Commodity Outlook

The upgraded financial projections are heavily influenced by a positive outlook on key commodity prices. Nuvama anticipates that global deficits in aluminium, zinc, and silver will keep prices well above their historical averages. The brokerage has adjusted its price forecasts for FY27 and FY28 to USD 3,000 and USD 2,750 per tonne for aluminium, and USD 3,000 and USD 2,900 per tonne for zinc, respectively. The forecast for silver has been set at USD 60 per ounce for both years. These projections are significantly higher than the historical averages from FY16 to FY26. Furthermore, the INR to USD exchange rate assumption has been revised to 89 for the forecast period, up from 87.5 previously.

The Demerger Nears Completion

Vedanta has achieved critical milestones in its plan to demerge into five separate listed entities. The company received approval from the National Company Law Tribunal (NCLT) for its demerger scheme on December 16, 2025, and a separate approval for its power division on January 9, 2026. With these key legal hurdles cleared, Vedanta is now in the final phase of securing procedural approvals from the Registrar of Companies and stock exchanges. The entire process of demerging and listing all five entities is expected to be completed by the first quarter of FY27, which could potentially be done in phases depending on the timing of the final approvals.

Financial Projections and Shareholder Value

The combination of higher commodity prices, cost reductions in the aluminium business, and volume growth is expected to fuel the projected 20% EBITDA CAGR. Nuvama's report also suggests that the allocation of debt across the newly formed entities will be managed prudently to ensure comfortable servicing. The demerged entities, particularly Vedanta Aluminium and Vedanta Limited (which will house Hindustan Zinc and international zinc operations), are expected to continue their dividend payouts. The brokerage anticipates a dividend per share of around Rs 15 from Vedanta Aluminium and Rs 5 from Vedanta Limited in FY27 and FY28.

Valuation Deep Dive: The Sum-of-the-Parts Logic

Nuvama's SOTP valuation of Rs 806 per share reflects higher valuation multiples for Vedanta's key businesses. The aluminium business is now valued at 6.5 times EV to EBITDA, up from 6 times, while the steel and iron ore segments are valued at replacement cost. The analysis assigns a value of Rs 408 per share to the aluminium business and Rs 293 to Vedanta Limited. This breakdown suggests that the current market price has not fully factored in the potential of the aluminium and zinc businesses, leaving other segments undervalued. In a more bullish, mark-to-market scenario with higher commodity prices, Nuvama estimates that the fair value could reach as high as Rs 1,076 per share.

Market Reaction and Stock Performance

The market responded strongly to Nuvama's revised outlook. Vedanta's stock not only gained 3.32% but also hit a new peak during the day's trading. This performance is part of a longer-term trend, with the stock delivering returns of over 52% in the past twelve months. The rally reflects growing investor confidence in the company's strategic direction and its ability to capitalize on favorable market conditions.

Analysis and Conclusion

Nuvama's upgraded target price for Vedanta signals strong confidence in the company's demerger strategy and its earnings potential amid a favorable commodity cycle. The detailed SOTP valuation provides a clear roadmap for how value could be unlocked as separate entities focused on aluminium, zinc, power, and other assets are listed. For investors, the key catalysts to monitor are the final regulatory approvals for the demerger and the sustained performance of global commodity markets. While the stock has already seen a significant run-up, the analysis suggests that further upside remains if the company successfully executes its restructuring and the projected market conditions hold true. The completion of the demerger by Q1 FY27 will be the ultimate test of this investment thesis.