The demerger of Vedanta Ltd., which is in its final stages, is expected to unlock value by 51% for investors, driving market capitalisation of the company to Rs 3 lakh crore from the current Rs 2 lakh crore, according to brokerage firm Emkay.
The company first disclosed its demerger plans in September 2023. It announced it would restructure its business units into independent, "pure play" companies to unlock value and attract more investment.
The company is currently awaiting NCLT approval—the final milestone—and hopes to complete the demerger by March 2025.
Unlocking Value For Shareholders
According to the brokerage, diversified companies—which is the structure Vedanta currently follows—often trade at a discount compared to their pure-play counterparts due to a perceived lack of focus and complexity.
Investing in a diversified mining company also exposes investors to the risks of multiple commodities. If one commodity performs poorly, it can drag down the overall valuation, even if other commodities are doing well.
The demerger would split the company into pure-play companies, where they could focus on their core businesses and improve operational efficiency. Emkay noted each pure-play company could then be valued independently based on its specific commodity and business fundamentals. This could result in a higher overall valuation for the group as a whole.
Change In Valuations And Market Capitalisation
Emkay noted that Vedanta was currently trading at 5.3 times its fiscal 2026 forward EV-to-Ebitda ratio. This could potentially re-rate to 7.1 times, implying a 51% upside potential via the demerger.
How Big Will The Companies Be?
As per Emkay, Vedanta and Vedanta Aluminium are expected to be large-cap companies following the demerger.
On the other hand, Vedanta Oil & Gas, Vedanta Steel & Ferrous Materials, and Vedanta Power should be sizeable, fast-growing mid-cap companies, the brokerage stated.
Vedanta Base Metals would mainly house international operations, and could act as a vehicle for global merger and acquisition opportunities in copper and zinc.
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