Blackrock, ADIA, domestic funds hike stake in Vedanta

Bengaluru, 8 April 2024: The world’s largest asset manager BlackRock, as well as the Abu Dhabi Investment Authority, along with domestic mutual funds like ICICI Mutual Fund and Nippon India Mutual Fund have increased their holdings in Vedanta by almost 2 per cent during the last four months, said market participants.

At the same time, foreign institutional investors (FIIs) increased their stake in the conglomerate by 1.2 per cent during the corresponding period, they added.

The recent rally in Vedanta share price on the back of demerger plans, deleveraging and soaring metal prices has led to a bullish call by domestic and international funds.

“Vedanta has witnessed significant buying interest. Many foreign and domestic investors have increased their stake on the back of strong fundamentals,” according to a dealer in a foreign brokerage house.

This comes at a time when the Vedanta stock has surged almost 30 per cent, adding about USD 3 billion to its market capitalization since December.

Shares of Vedanta Limited hit a 52-week high of Rs 322 on April 5, closing up more than 3 per cent during the trading session, and more than 15% in the last five trading sessions (April 1 to April 5).

This is in line with the strength in global metal prices that are soaring due to multiple factors. Strong industrial data from China indicated an expansion in manufacturing activity for the first time in six months.

As China is the largest consumer of multiple metals, the strong economic data has led to a rally in metal stocks including Vedanta, a leading producer and supplier of iron ore, steel, copper and aluminium.

The rally is a reflection of the overall business potential and EBITDA projections of the company.

Vedanta is expected to clock nearly USD 5 billion of EBITDA in FY24 (April 2023 to March 2024). Similarly, the Vedanta Group is eyeing an EBITDA of USD 6 billion in the next financial year (FY 25) and scaling it to USD 7-7.5 billion in the following year on the back of operational efficiencies across businesses.

The company is also on track for the demerger of its key businesses, including aluminium, into separate listed companies and allocation of debt across the demerged entities that would be done in proportion to their assets, sources had said.

Vedanta had earlier said that it plans to deleverage debt by USD 3 billion over 3 years and that its promoter entity – Vedanta Resources – does not foresee a rollover of its debt.

“Deleveraging is our priority. We would be deleveraging the debt of Vedanta Resources by USD 3 billion over the next three years. Vedanta Ltd’s cash flow pre-growth capex is estimated to be USD 3.5-4 billion for financial year 2025, sufficient for secured debt maturities of USD 1.5 billion,” said Navin Agarwal, Vice Chairman, Vedanta Ltd and member of promoter group, at a recently concluded analysts’ meet, according to analysts who attended the meeting.

In September last year, Vedanta announced the demerger of metals, power, aluminium, and oil and gas businesses to unlock potential value. After the exercise, six independent verticals – Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Limited – will be created.

For every share of Vedanta, shareholders will receive one share of each of the five newly listed companies. After the demerger, the businesses of Hindustan Zinc as well as the electronics business will remain with Vedanta Limited.