Vedanta Group Biggest Wealth Creator in FY25 till Date; Adds Over Rs 2.2 lakh crore in market cap

Defying the volatility in the market caused by the general elections, the Vedanta Group (comprising of Vedanta Ltd, Hindustan Zinc Ltd) has driven maximum wealth for investors on Dalal Street in the current financial year so far. This is higher than the market cap growth witnessed by leading Indian businesses such as Reliance Industries, Mahindra Group, and the Tata Group during the same period.

The market capitalization of the Vedanta Group surged by over Rs 2.2 lakh crore between March 28 and June 20, 2024.  Comparatively, the Adani and Mahindra groups saw their market cap rise by Rs 1.4 lakh crore each. While Tata Group’s market cap rose by over Rs 60,600 crore, heavyweight RIL’s market value declined by more than Rs 8200 crore. The stellar run in shares of Hindustan Zinc has bolstered the value of the Government of India’s 29.5% stake in the zinc major by 2x to more than Rs 80,000 crore.

Factors Driving Bull Run

Vedanta and Hindustan Zinc shares have rallied 2x from their 52-week lows, backed by multiple positives including the proposed demerger, management’s consistent focus on deleveraging, and significant improvement in earnings.

Vedanta continues to be among the lowest cost producers of aluminum and zinc globally, which has driven its profitability. Vedanta delivered its second highest-ever revenue of Rs 1,41,793 crore and EBITDA of Rs 36,455 crores in FY24, with an EBITDA margin of 30% despite a moderate commodity cycle.

The Vedanta Group has chalked out a strategic roadmap to achieve an EBITDA of $10 billion in the near term, backed by timely execution of more than 50 high-impact growth projects, including those in Zinc, Aluminum, Oil & Gas and Power businesses.

These factors led to the outperformance of Vedanta Group compared to its peers in the non-ferrous pack significantly. While Vedanta has turned a multibagger, peers Hindalco Industries, National Aluminium Co, and Hindustan Copper have given lesser returns since April.  

That the conviction on Vedanta among investors is increasing was evident by the high institutional buying in the counter, as foreign institutional investors’ holding in Vedanta went up to 8.77% at the end of March quarter, from 7.74% a quarter ago.

Bright Prospects

With debt related issues largely settled in the medium term and the company’s continued focus on growth, most analysts have a bullish view on the stock.

Brokerage Nuvama Institutional Equities upgraded Vedanta’s price target to Rs 644, while raising its EBITDA estimates for FY25 and FY26. It said that the approval by lenders shall allow for demerger of companies by end-FY25.

Further, brokerage firm Investec upgraded the target price to Rs 473, while CLSA India noted in its recent report that profitability improvement initiatives like major cost reductions via alumina refinery capacity expansion, higher power generation efficiency, commissioning coal blocks and bauxite mines will be key to a re-rating.

Adding to the positive is the strengthening of commodity prices, which, along with accrual of benefits of most cost optimization initiatives coming from FY25 onwards, is expected to support Vedanta’s profitability, say analysts.