As per the presentation, the Vedanta Group is investing over $8 billion in its ongoing expansion projects collectively.
The strategic roadmap of mining conglomerate Vedanta Group, which aims to achieve a $10 billion near-term EBITDA, will be fueled by the timely completion of more than 50 high-impact growth projects, including those in the power, zinc, and aluminium industries.
A powerpoint presentation given to over forty-five fund managers and analysts during a site visit arranged by the Vedanta Group stated that these projects are nearing completion.
Projects for Vedanta’s aluminium industry are in motion to attain an integrated supply of 3.1 million tonnes annually.
With a 100% vertically integrated supply chain and production costs at multi-year lows of $1,711 per tonne, it is in the first quartile of the worldwide cost curve. According to the company, the domestic market in India is expected to increase every five years, providing a 2x strong demand outlook.
The zinc division of Vedanta generates 1.2 million tonnes of zinc metal annually at a cost of $1,000 per tonne, but the company produces 800 million tonnes of silver. In India’s primary zinc industry, the company holds a 75 percent or more market share, and a growth plan aimed at 2 million tonnes is now being developed.
The Vedanta Group’s oil and gas division, meantime, is concentrating on growing its resource base to 2 billion barrels of oil equivalent in the next three years. According to the presentation, the company aims to produce 300,000 barrels of oil equivalent each day, which is more than twice as much as it does now.
Major projects being carried out by the Vedanta Group also include increasing the capacity of the BALCO smelter from 0.6-1 million tonnes, the Lanjigarh alumina refinery from 3.5-5 million tonnes, and the total power generation capacity from 2.9 GW to 5 GW.
According to the presentation, the Vedanta Group is investing a total of almost $8 billion in its ongoing growth projects.
As a result, a number of prestigious brokerage companies have raised their target price for the business.
“We are raising FY25E/26E EBITDA by 5–6% per cent, factoring in operational efficiency, lower aluminium cost of production due to captive alumina and higher premiums for aluminium and zinc,” Nuvama said in its research, upgrading Vedanta’s price estimate to Rs 644.
Meanwhile, by the end of FY25, company demergers will be permitted with lender consent. Our target price is Rs 644 (previously Rs 542) based on our valuation of Vedanta, ex-HZL at 6x FY26E EV/EBITDA (previously 5.5x) and HZL at 7x FY26E EV/EBITDA.
Investec also increased the target price to Rs 473.
The commissioning of coal blocks and bauxite mines, increased power generation efficiency, significant cost reductions through alumina refinery capacity expansion, and other profitability improvement projects are critical to a re-rating, according to a recent analysis by CLSA.
In addition to possibly producing $5 billion in free cash flows, Vedanta’s growth projects and current assets will make a substantial contribution to the development of the country by providing stakeholders with a sustainable return.
Zinc India (silver and zinc) contributed $2.7 billion, oil and gas contributed $0.9 billion, and aluminium contributed $4.2 billion of the $10 billion near-term EBITDA.
With a forecast for robust economic growth, the Gross Domestic Product (GDP) of India to exceed $7 trillion by 2030, the Group is well-positioned to benefit from this trend.
By the end of this year, the company plans to list five more corporations on public markets, pending regulatory permission. Additionally, the company has suggested a vertical separation of the businesses.
According to the plan, current shareholders would also receive one share of each of the five recently listed businesses for every share of Vedanta Ltd.
Zinc and other current businesses will continue to be under Vedanta Ltd., but the demerger will form independent pure play firms in the aluminium, power, basic metals, oil and gas, steel and ferrous industries.