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Vedanta Plans Business Split to Unlock Value
Vedanta Limited is planning a major split, dividing its main business units into five separate companies that will be listed independently by mid-June 2026. Chairman Anil Agarwal called it an "exciting new chapter," aiming to unlock value by giving each segment its own growth plan and capital strategy. This move comes as Vedanta's stock has risen about 80% in the past year, nearing record highs.
Aggressive Growth Plans for Key Businesses
The split is tied to big expansion goals. Aluminum production is set to double to 60 lakh tonnes annually, aiming for top global cost efficiency. The oil and gas division plans to invest $5 billion to increase output to 300,000-500,000 barrels daily, helping meet India's energy needs. Vedanta Power aims to grow capacity from 4.2 GW to 12 GW, with future plans for hydro and nuclear power. The iron and steel business expects to more than triple capacity from 40 lakh to 150 lakh tonnes per year, backed by captive mines and gas supply.
What Vedanta Will Keep After the Split
The main Vedanta company will keep major stakes in key businesses. This includes about 60% of Hindustan Zinc (HZL), India's top producer of zinc, lead, and silver, which runs the world's largest integrated zinc operation. Vedanta will also hold Vedanta Zinc International (VZI) with assets in South Africa and Namibia, its copper business (holding 35% of the Indian market), and the ferro alloys division. Vedanta is also India's only producer of nickel metal and cobalt sulphate, vital for EV batteries.
Debt Allocation and Valuation Worries
While the market welcomed the demerger, expecting value to be unlocked, significant financial issues remain. The main worry is how Vedanta's large net debt, around ₹60,600 crore, will be split. Some analysts warn that an uneven distribution could hinder stock price gains and cause short-term drops, with some predicting prices could fall to ₹300-325 after the split, depending on the debt division. The company's debt-to-equity ratio has varied significantly in recent years, showing how sensitive its finances are to debt. Dividing the debt means each new company must be able to manage its own debt and attract investment, especially in volatile commodity markets.
Execution Risks and Market Volatility Concerns
The wide range and simultaneous nature of these large expansion projects across different business lines bring considerable execution risk. Vedanta Aluminum faces stiff global competition despite its cost targets. The oil & gas division competes with established energy producers as it aims for higher output. Vedanta's stock performance during past restructurings has been mixed, showing how market sentiment can shift. Moreover, the company's profits depend on commodity prices for aluminum, oil, zinc, and steel, which could offset gains if prices fall. The company has also had past issues, like the temporary closure of its Tuticorin copper smelter over environmental concerns.
Analyst Views Remain Positive Despite Risks
Despite these risks, most analysts remain cautiously optimistic, with a majority rating Vedanta a 'Buy' and setting average 12-month price targets near ₹820-860. The demerger is viewed as a way to unlock value, especially for Vedanta Aluminium, which benefits from current tight supply and rising prices. The split also aims to attract more investors by allowing them to invest in specific business segments. The success of this major restructuring depends on Vedanta managing its debt well, completing expansion projects on time, and navigating global commodity market ups and downs.