Vedanta best-placed to ride rising commodity prices, say analysts
Vedanta Ltd is likely to see less pressure on cash flows after liability management at the holding company level and is now best placed to ride rising commodity prices, analysts said. Improved performance in aluminium, power and zinc enabled the company to turn in EBITDA of Rs 87,600 crore in the January-March quarter, up by 4 per cent quarter-on-quarter. The improved performance was attributable to lower cost of production in aluminium and zinc and higher sales volume, partially offset by softer zinc prices. Despite marginal delays, Vedanta is set to complete its alumina/aluminium/ international zinc expansion during the current fiscal year (FY25), which will provide visibility around volume growth and cost reduction FY26 onwards. The start of coal mines in FY26 shall further lower its aluminium cost of production.
In a post earnings note, Nuvama Institutional Equities said management is moving ahead to demerge the businesses by end of current fiscal (April 2024 to March 2025). The vertical split of its businesses into six listed entities can yield Vedanta higher-than-the-current value.
«We believe Vedanta is best placed to ride rising commodity prices. Rising commodity prices not only improves cash flows, but open up the potential of increasing the valuation multiple too as debt overhang shall subside significantly,» it said.
Citi said liability management at the holding company gives confidence around Vedanta India's balance sheet as well.
«With less pressure on cash flows, commodity price resilience,
