Broker’s call: Vedanta (Neutral)

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Target: INR 280

CMP: INR 277.65

Our analysis of Vedanta Limited The annual report for the fiscal year 2013 showed that despite fluctuations in prices and high costs of inputs, domestic demand remained resilient for the company. India’s mineral consumption is expected to remain strong, driven by the ‘industrialization, infrastructure and energy’ triad.

Improving living standards, rising incomes, urbanization and industrialization, along with the government’s drive towards infrastructure, construction, housing and energy bodes well for the growth of this sector.

Vedanta is a minerals and mining powerhouse with presence across zinc, lead, silver, aluminium, oil and gas, copper, iron chromium, iron ore, energy and steel. Vedanta is currently trading at 5.5x FY25E EV/EBITDA.

Any delay in payment or failure to raise capital in HoldCo will adversely affect VEDL. Almost 100 per cent of the tenure of the promoter has been pledged and any adverse scenario would have a negative impact on the company.

To meet HoldCo’s debt repayment obligations, Vedanta declared a record dividend of ₹101.5 per share. We believe Vedanta will pursue a similar strategy to meet future debt obligations. To meet debt repayment obligations, Vedanta Resources relies heavily on dividend payments by Vedanta, which in turn relies on HZL.