Vedanta shares rally 4%; brokers upgrade rating on demerger plan. Should you buy or sell?
Vedanta to outperform rating, Nuvama upgraded it to hold. Kotak Institutional Equities, however, remains a bear on the stock with a sell rating.
The stock, meanwhile, added over 4% following the demerger plan.
Dalal Street investors on Tuesday welcomed billionaire Anil Agarwal's decision to split the conglomerate Vedanta into six different listed entities, with the stock jumping about 4.5% to Rs 232.35 on BSE. While global brokerage firm CLSA upgraded Vedanta to outperform rating, Nuvama upgraded it to hold.
Kotak Institutional Equities, however, remains a bear on the stock with a sell rating.
As part of the proposed demerger plan, Vedanta shareholders will receive one share each of 5 newly-listed entities for every one share held in the parent company.
The 5 new companies will be named Vedanta Aluminum, Vedanta Oil and Gas, Vedanta Power, Vedanta Steel and Ferrous Materials and Vedanta Base Metals. Vedanta will act as an incubator for Vedanta Group, while also functioning as the holding company for Hindustan Zinc.
To ensure a transparent and non-cluttered capital allocation policy across zinc, semi-conductors, stainless steel, and technology verticals, Vedanta will not have any cross holdings in the newly-listed entities.
Expected to take 12-15 months, subject to all the necessary approvals from shareholders, lenders, creditors, and regulatory authorities, the demerger is expected to unlock stakeholder value, attract strategic investment, improve competencies, and ensure better customer alignment and transparency.
Here's are what brokerage said on Vedanta's demerger plan:
CLSA
CLSA has upgraded Vedanta to outperform from underperform earlier but slashed the target to Rs 230 from Rs 255.
