India was witnessing remarkable development across various sectors, with electric vehicles, electrical infrastructure, and manufacturing sectors leading the charge. The metal and mining industries were playing a crucial role, fueling growth in numerous sectors and driving economic progress.

In the metal and mining sectors, Vedanta is a powerhouse and also spearheads innovation and sustainable practices. In this article, we delve into Vedanta’s future prospects, examining its diverse segments and conducting a comprehensive financial analysis. Will this help to cross Vedanta to Rs. 500 marks? Let’s dig in!

India’s Economic Outlook and Industrial Position

India’s economic future shines bright, with projections placing it as the world’s third-largest economy by FY 2027–28, boasting a US$ 5 trillion GDP. Robust infrastructure spending, manufacturing sector development, and strong consumer sentiment are driving the growth. The IMF forecast Indian GDP growth rates of 6.8% and 6.5% for FY 2024-25 and FY 2025-26, respectively.

India has secured impressive global rankings in key industries, such as 2nd in Aluminium production, 3rd in lime production, and 4th in iron ore output. India also holds the title of second-largest crude steel producer worldwide. Experts anticipate India’s zinc demand to double within 5–10 years, fueled by significant infrastructure investments. The country has set an ambitious target of achieving a 300 million tonnes per annum (MTPA) crude steel capacity, further solidifying its industrial prowess on the global stage.

Company Overview Of Vedanta

Vedanta was established in 1979, over 45 years ago. The company was earlier known as Sesa Goa Pvt. Ltd. In 2007, Vedanta Resources Limited was taken over by the company. The company’s headquarters are in Mumbai, India, and it is an Indian multinational mining company.  Vedanta Limited is a prominent global natural resources and technology conglomerate. Initially established as a small mining company, Vedanta has grown significantly, diversifying its operations across various sectors, including metals and oil and gas. 

Over the decades, Vedanta has expanded its footprint internationally, establishing operations in countries such as South Africa, Liberia, and Namibia. The company has made strategic acquisitions, including significant stakes in Hindustan Zinc and Konkola Copper Mines, which have maintained its market position. The company has reported more than 97,000 employees in FY24. Vedanta is committed to sustainable practices, aiming for net-zero carbon emissions by 2050 and investing heavily in environmental, social, and governance (ESG) initiatives.

Segment Analysis of Vedanta

Vedanta Limited is recognized for its robust portfolio, which includes zinc, lead, silver, copper, aluminum, and iron ore, alongside power generation capabilities.

Aluminum: The company is the largest aluminium producer in India and has a 45% market share in India among aluminium producers. It has the highest-ever annual aluminum cast metal production of 2,370 kt, up 3% YoY, and an alumina capacity of 1,813 kt. 

Zinc-Lead-Silver: Hindustan Zinc became the third-largest silver producer globally. It holds a 75% market share in India’s primary zinc market. The company has a production capacity of 817 kt zinc, 216 kt lead, and 746 tonnes silver in India. Although Zinc International has a capacity of 208 kt in MIC.

Oil and Gas: The company operates almost 25% of India’s crude oil production. It has an average daily gross operated production of 128 thousand barrels of oil per day (Kboepd).

Power: The company is one of the largest power producers in India’s private sector. It has a total power capacity of 11 GW and an installed IPP capacity of 4.8 GW. 

Iron Ore: Vedanta is one of the largest merchant iron ore miners and one of the largest producers and exporters of merchant pig iron in India. It has achieved record production and sales in Karnataka, with 5.6 million tonnes of saleable ore produced. The company also produces 831 kt of pig iron.

Steel: The company has recorded the highest-ever annual saleable production of 1,386 kt and hot metal production of 1,473 kt, both up by 8% YoY. The segment also saw a record annual dispatch of 1,394 kt, up 11% YoY. The company has a total design capacity of 3.5 MTPA.

Facor: The company achieved an all-time high annual ferrochrome production of 80 kt, up 18% YoY. A new briquetting plant with a capacity of 20 TPH was installed, enhancing production capabilities.

Copper India: The company has a production capacity of 400 KTPA of Tuticorin smelter and 216 KTPA of Silvassa refinery. Vedanta has also a production volume of the cathode of 141 kt. Since April 2018, the segment has achieved its highest-ever sales at 198 kt since the closure.

Financial Analysis Of Vedanta

Looking deeply into the financial parts of Vedanta Limited, the company’s revenue has increased from the last four years to FY23. Later in FY24, the revenue dropped from ₹147,308 crore to ₹143,727 crore, which is down by 2.43%. The primary sources of revenue for FY24 are zinc, lead, and silver (19.56%), zinc international (around 2.49%), oil and gas (12.49%), aluminium (33.89%), copper (13.82%), iron ore (6.35%), power (4.31%), and other sources (7.06%). The company’s revenue grew at a CAGR of 14.22% over the last four years. 

Vedanta Limited’s net profit has decreased over the last three years. The company’s net profit has declined from ₹14,506 crore in FY23 to ₹7,537 crore in FY24, which is down by 48.04%. The main reason for changes will be an increase in operations expenses and interest expenses. The net profit grew at a CAGR of -20.56% over the last three years.

Vendata Limited has improved its operating profit margin from 24.68% in FY23 to 27.72% in FY24. The net profit margin dropped over the last two years, which is from 17.52% in FY22 to 9.66% in FY23 and 5.15% in FY24. The company’s ROE and ROCE are 13.79% and 24.09%, respectively. Vedanta Limited’s net borrowing has increased from ₹80,329 crore in FY23 to ₹87,706 crore in FY24. This will reflect the debt-to-equity ratio. It has increased from 1.68x to 2.34x in FY24.

Vedanta Limited is recognized as one of the highest dividend-paying companies. It will be an attractive option for income-focused investors. The company has consistently declared dividends, with a total payout of ₹29.5 per share for the financial year 2023-24. Currently, Vedanta’s dividend yield stands at approximately 6.06% based on its recent share price. For FY25, the company has declared till now a total dividend of ₹35, which includes Vedanta’s recently approved third interim dividend of ₹20 per share.

Shareholding Pattern of Vedanta

Vedanta Limited has a major holding of promoters (56.38%), domestic institutional investors (15.65%), financial institutional investors (12.61%), governments (0.07%), public holdings (15.11%), and others (0.17%) as of June 2024. In the shareholding pattern of Vedanta Limited, domestic institutional investors and financial institutional investors have increased their stakes in the last six quarters, and the public has been selling their stakes in the last five quarters. This typically signals strong market confidence, leading to an increase in the company’s stock price and overall market valuation.

Below the bar diagram, we can see the shareholding pattern of Vedanta Limited

Will Vedanta’s future plans help to cross the ₹500 mark?

• Vedanta has committed to spending $8 billion in growth capital expenditure over the next few years, including $1 billion over the next 5 years to increase copper production and cobalt production.
• Vedanta aims to reach a production capacity of 3.1 million tons per year of aluminium, with 90% comprising value-added products and alloys.
• The company is on track to commission Train 2 of the Lanjigarh alumina refinery in Q3 FY25, with complete initialization expected by Q1 FY26. This will increase capacity to 5 million tons per year.
• Vedanta is targeting the first ore production from the Kurloi and Radhikapur coal mines in Q1 FY26, which will help in backward integration for aluminum production.
• Vedanta plans to increase Zinc International production from the current 250,000 tons to 500,000 tons within two years, with a long-term goal of reaching 1 million tons per year.
• The company aims to increase oil and gas production to 130,000-140,000 barrels per day by the end of FY25, with a near-term target of 150,000 barrels per day and a long-term goal of 300,000 barrels per day.
• Vedanta’s expansion of ESL Steel to 3.5 million tons per year is estimated to be completed by FY25.
• Vedanta is well-placed to generate 5 gigawatts of commercial power over the next two years, including the full commissioning of the Meenakshi power plant (1,000 megawatts).
• The company plans to increase ferroalloy production capacity from 110,000 tons per annum to 150,000 tons per annum in FY25.
• Vedanta Limited is exploring routes to expand metal production to 2 million tons per annum in the near future.

Also read…

Key Financial Metrics Of Vedanta

Some of the key financial metrics of Vedanta Limited are given below.

Target Price

• Motilal Oswal has announced the target price of Vedanta Limited will be ₹500. According to Oswal, the company is continuously striving to reduce costs across its businesses through backward integration, operational efficiencies, and captive power usage.

• Nuvama has given a target on Vedanta Limited to ₹644. According to the brokerage, the company has improved operational efficiency, lower aluminum CoP due to captive alumina, and higher premiums for aluminum and zinc.
• Philip Capital declared the target price of Vedanta Limited will be ₹552. The brokerage says that the company has improved its operation margin and debt management and also held a stake in the Hindustan Zinc and Aluminium Business.

Conclusion

Vedanta is well-positioned to cross the ₹500 mark due to its diverse business segments and strong financial performance. Vedanta’s improving financial health, with rising operating profit margins and strategic cost reductions, further supports this upward trend.

Moreover, the company’s robust future plans, including increased production capacities and investments in sustainable practices, provide a strong foundation for growth. Although the shareholding pattern of Vedanta Limited’s FII and DII is increasing their stake. Multiple financial analysts have set target prices above Rs. 500, indicating positive market sentiment.

These all factors combined suggest that Vedanta is likely to surpass the ₹500 mark, driven by its expanding operations and strategic initiatives. What do you think about Vedanta Limited? Let us know in the comments below.

Written By Nikhil Naik

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.

---

Start Your Stock Market Journey Today!

Want to learn Stock Market trading and Investing? Make sure to check out exclusive Stock Market courses by FinGrad, the learning initiative by Trade Brains. You can enroll in FREE courses and webinars available on FinGrad today and get ahead in your trading career. Join now!!