Vedanta has been making headlines with its demerger plan and splitting the 5 different businesses. The stock has rallied nearly 4% intra-day today. However, the company recently hit a roadblock when the National Company Law Tribunal (NCLT) dismissed the demerger proposal of Talwandi Sabo Power (TSPL), a key subsidiary. The tribunal ruled that the scheme lacked key disclosures, especially concerning TSPL’s debt obligations.
Vedanta stock performance
Vedanta shares have shown resilience despite the NCLT ruling. In today’s trading session, the share price of Vedanta is up nearly 4% intra-day. Looking at a broader trend, Vedanta’s share price has surged close to 10% in the last five days. However, over a six-month period, the stock has declined by 5%. Year-to-date (YTD), Vedanta’s stock is down nearly 2%, but in the past year, it has delivered strong gains of over 55%.
Vedanta demerger plans
Vedanta’s demerger plan is set to reshape the company by splitting it into multiple independent entities, each focused to a specific business segment. The plan has already received backing, with 83% of creditors approving it, well above the required 75% threshold.
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Emkay Global Financial Services has initiated coverage on Vedanta with a ‘Buy’ rating, setting a target price of Rs 575.A major factor influencing Vedanta’s financials is Hindustan Zinc, which contributes 40% to the company’s EBITDA. As per the brokerage report, Hindustan Zinc operates a world-class asset with strong margins and return ratios. The company aims to nearly double its capacity to 2 million tonnes by 2030 and optimise costs to enhance profitability.
Vedanta Growth Plans: Doubling capacity by 2030
Hindustan Zinc is focusing on increasing its production capacity from 1.2 million tonnes to 2 million tonnes over the next five years. The first phase of expansion, already in progress, will add 250 kilotonnes of mining and smelting capacity by FY27/28.
“Hindustan Zinc plans to spend USD1-1.2 billion to set up 250 kilotonnes of combined mining and smelting capacity, which is at the lower end of the global standards of capital intensity in zinc. On the mine re-auctions debate, Hindustan Zinc has the right of-first refusal and is confident that it would retain the mines,”
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