Vedanta shares jump 2%, as company sticks to existing structure; brokerages see upside of 28%

Metal major Vedanta Limited's shares jumped almost 2 per cent to touch day’s high level of Rs 376.3 per share on the BSE in the intraday trade on Wednesday, as the company’s board on Tuesday decided to continue with its existing structure. 

As per Vedanta’s filing to exchanges, “Company has concluded this comprehensive review with inputs from various experts and advisors. The Board of Directors concludes that the current structure is optimal and is commensurate with the current scale and its diversified lines of businesses.” 

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The Board on November 17, 2021 had decided that the company should undertake a review of the corporate structure and evaluate full range of options and alternatives to unlock value and simplify the corporate structure, it said. 

On capital allocation policy, the company had said that the best net date in the industry/EBITDA 0.7 times and focus is on increasing total shareholder returns, Vedanta said. 

On Capital Expenditure front, the company will invest in projects with more than 18 per cent IRR, besides, value-added products, reduction in expenses will be a focus on ESG, it also said in a filing. 

With respect to dividend policy, the company said in statement that 30 per cent of the profits will be given as dividend, the profit of Hindustan Zinc is not included, while dividend of Hindustan Zinc will also be passed on within 6 months. 

In its interest in strategic disinvestment, Vedanta had said that Bharat Petroleum Corporation Limited's (BPCL) bid at is EOI (Expression of Interest) stage, and it plans a strategic investment in BPCL with profit sharing or management fee model. It mentioned that the strategic fund to be ready, pressure will not come in Vedanta's balance sheet. 

A global brokerage firm JP Morgan upgrades Vedanta to Overweight from Neutral and see an upside of around 26 per cent with a target of Rs 465 per share from Rs 375 per share earlier. 

The brokerage said, multiple positive steps announced by the company which makes a case for re-rating increase target multiple to 4x FY23E EV/EBITDA versus earlier multiple of 3.2 times. 

Similarly, another global brokerage firm CLSA reduces the target price to Rs 350 per share from the current market price of Rs 369 per share Monday’s closing.  

The brokerage noted that the company would look at other investor concerns like deleveraging of parent. Also, its participation in government’s stake sale in Hind Zinc will also be keenly watched.