Bengaluru : Brokerage Nuvama said in a recent report that Vedanta’s focus on demerger, delivery and deleveraging (3Ds) is on course to pay off, supported by favourable commodity prices. The firm expects the proposed five-way demerger to unlock about Rs 84 per share in additional value as each business is valued independently and multiples adjust to their underlying fundamentals.
Nuvama expects an NCLT order in December and completion of the demerger process by the end of FY26, adding that the move comes as aluminium, power, and zinc operations ramp up, costs decline, and leverage trends improve, factors which the firm says will strengthen the case for a re-rating once the demerger is executed.
On the potential for value creation post-demerger, Nuvama notes that Vedanta’s fair value is likely to see further improvement. The firm believes the demerger will unlock value by enhancing the valuation multiples of businesses such as aluminium, steel, and power. “We estimate our fair value of Rs 686 (ceteris paribus) shall be enhanced by Rs 84/share once the demerger comes into effect,” Nuvama stated.
Nuvama sees the highest rerating opportunity in Vedanta’s aluminium business. “Currently, all aluminium companies’ sensitivity to aluminium price change is 3–5%, but post-demerger, Vedanta Aluminium’s sensitivity is high at ~8%,” it said. “We believe with the demerger, the aluminium business shall command a higher EV/EBITDA multiple (6.0x-plus). Assuming an even 0.5x increase in multiple to 6.5x, the fair value is likely to be higher by Rs 36/share,” Nuvama said.
Vedanta’s iron and steel business, which includes a 1.5mtpa steel plant, along with captive iron ore, and a 10 MTPA merchant iron ore facility (7mtpa at Karnataka and 3mtpa at Goa), is also set for a rerating. Nuvama has valued this business at five times the FY28E EV/EBITDA, arriving at an enterprise value of Rs 77.9 billion (Rs 20/share). “We are factoring in FY27E/28E EBITDA of Rs 15.9bn/Rs 15.6bn. If we value the steel plant at replacement cost, the fair value could be ~Rs 109bn (Rs 28/share). This, including the iron ore business, can lead to a total enterprise value of Rs 159 billion (Rs 41/share); thus, an incremental value of Rs 21/share exists,” Nuvama said.
Nuvama is also bullish on the prospects of Vedanta’s power business, which recently signed a 500MW PPA from the Tamil Nadu Discom, with power supply starting from May 2026 for five years, setting it for a value boost. “Our current value implies power assets are valued at Rs 52mn/megawatt versus the capex of any greenfield plant of Rs 70–80mn/megawatt. We reckon the market shall still value it at a minimum of Rs 65mn/megawatt. If this happens, incremental value could be ~Rs 28/share,” Nuvama said.
Vedanta has proposed a demerger that will result in the creation of sector-specific pure play entities in aluminium, oil and gas, iron and steel, and power, while certain existing and new businesses will remain under Vedanta Ltd. The demerger is proposed as a simple vertical split, where for every share of Vedanta, a shareholder will receive one share in each of the five newly listed companies. The Mumbai bench of the National Company Law Tribunal has reserved its judgment on the demerger.
