Vedanta demerger: Firm's share price trades 2% lower; here's what Citi's analysis say

Vedanta had conducted a special trading session on April 30 for price discovery as the group moves ahead with its restructuring into five separate listed entities, including the existing Vedanta Ltd.

The company's demerger, effective May 1, will split Vedanta into multiple sector-focused entities, each with independent growth strategies and capital allocation.

What Anil Agarwal said

On May 5, Anil Agarwal, the founder and and chairman of Vedanta Resources Limited, said Vedanta Ltd delivered a record financial performance in FY26 and is entering a new phase of restructuring aimed at unlocking value through a planned demerger.

Vedanta Limited is a major subsidiary of Vedanta Resources Limited (VRL)

In a letter to shareholders, Agarwal said Vedanta posted its highest-ever profit after tax (PAT) of ₹25,096 crore on revenue of ₹1,74,075 crore, driven by operational gains across businesses.

Total shareholder return was about 50%, outperforming sector benchmarks, while the company paid a dividend of ₹34 per share.

Vedanta also strengthened its balance sheet, with net debt-to-EBITDA improving to 0.95x, positioning it for greater financial flexibility, the Vedanta chairman said.

Agarwal on demerger

Agarwal said the demerger move is designed to create "globally competitive" businesses with clearer strategic focus and scalability.

"Your company, Vedanta, is embarking on a very exciting new chapter, where strong performance meets exceptional transformation," he said. "The stage is set for the next phase of growth and value creation."

The demerger marks a structural shift aimed at creating independent, sector-focused businesses. "This transformation marks a pivotal step in unlocking value by creating focused, world-class companies… each with sharper strategic clarity and distinct growth pathways," he said.

Post-demerger, Vedanta Aluminium aims to double capacity to 6 million tonnes per year, targeting cost leadership and growth tied to global demand in infrastructure and manufacturing.

Vedanta Oil & Gas plans to scale production to 300,000-500,000 barrels per day with a USD 5-billion investment programme.

Vedanta Power is targeting rapid expansion from 4.2 GW currently to a 12 GW pipeline, while also exploring hydropower and nuclear energy. Vedanta Iron & Steel plans to increase capacity from 4 million tonnes to 10 million tonnes, with further expansion potential supported by captive raw material resources.

Existing Vedanta Ltd details

The parent entity will retain stakes in key assets, including Hindustan Zinc Limited, along with international zinc operations, copper, nickel, and ferroalloys businesses, Agarwal said.

₹15,000 crore capex in FY26

Vedanta invested about ₹15,000 crore in growth capital expenditure during the year across aluminium, zinc, oil and gas, and emerging businesses.

Looking ahead, Agarwal said the group will focus on scale, cost efficiency and disciplined capital allocation, while increasing the use of technology and artificial intelligence to drive productivity.

"As we look ahead, our strategy is clear -- to build a structurally strong Vedanta Group for tomorrow," Agarwal said, adding that the company will focus on scale, cost leadership and disciplined capital allocation while leveraging technology and AI.

Citi’s analysis

Earlier, Citi said it was positive on the combined entity, citing comfortable leverage levels and potential upside in aluminium. However, post the demerger, the financial services firm has flagged two concerns.

First, the international financial services firm highlighted that more than 90% of Vedanta Ltd’s attributable EBITDA is now linked to Hindustan Zinc Ltd (HZL) and Zinc International, making the company heavily dependent on zinc. Analysts at Citi said it remains bearish on zinc prices, which have weighed on its outlook for the stock.

Second, Citi flagged concerns around the company’s dividend policy after the restructuring. It noted that Vedanta Ltd is no longer bound by its earlier commitment to distribute at least 30% of non-HZL profits along with upstreamed HZL dividends.

While the firm expects Vedanta to upstream the entire HZL dividend, the investment firm warned that uncertainty around future cash utilisation could create concerns for investors.

Citi has incorporated FY27 and FY28 zinc and silver price assumptions of $3,100 and $75, respectively, and said current spot prices on the London Metal Exchange suggest that the stock is fairly valued at current levels.