Vedanta’s Fundamental Analysis – Future Plans and More

Basic analysis of Vedanta: The mining and metals industry is a cornerstone of global economic development, encompassing a variety of sectors from infrastructure to technology. In this dynamic environment, Vedanta is emerging as a key player known for its diverse portfolio covering zinc, lead, silver, copper, iron ore, aluminum, and oil and gas.

In this fundamental analysis of Vedanta, we will look at its position within the industry amid evolving market conditions.

Fundamental Analysis of Vedanta – Company Overview

Vedanta It is a diversified metals and mining company headquartered in India. We operate on several continents, including South Africa, Liberia, UAE and Namibia. Founded in June 1965, the company has grown from humble beginnings to become a global powerhouse in the natural resources sector.

The company’s diverse portfolio positions it to strategically capitalize on changes in global demand patterns and commodity prices. Vedanta Ltd. More than 90% of its revenue is generated in India. Over the years, the company has grown exponentially and is poised to focus on massive expansion in India.

In addition to mining activities, Vedanta is India’s leading aluminum and copper producer. The market capitalization is Rs. 1,47,982 (Cr), which is the second largest figure compared to all competitors. It also pledged to reduce carbon emissions to zero by 2050 or sooner. The organization has pledged $5 billion over the next 10 years to accelerate its transition to net zero operations.

Division

By September 29, 2023, they have announced that they are splitting the business into an independent ‘pure play’ company that will have greater freedom to grow the business and achieve true value through independent management. These newly listed companies will have their own directors and board members and will be able to set their own strategies together with investors.

The board of Vedanta Ltd has announced that it will be demerged in the next 9-12 months to create six separate listed companies:

• Vedanta Aluminum
• Vedanta Oil and Gas
• vedanta power
• Vedanta Steel and Iron Materials
• Vedanta Base Metals
• Vedanta Limited

The spin-off is planned as a vertical split, where for every share of Vedanta Ltd, shareholders will receive one additional share of each of the five newly listed companies. As we work to overcome and resolve some legal compliance and debtor/investor issues, it is best to assume that the spin-off will occur in the first quarter of fiscal 2025.

segment analysis

Vedanta holds a unique portfolio of assets among Indian and global players, including metals and minerals (zinc, silver, lead, aluminium, chrome, copper, nickel), oil and gas, traditional iron industries including iron ore and steel, and power including coal. I’m doing it. New and renewable energy, semiconductors, display glass, etc. Here we have taken a detailed look at the company overview in our fundamental analysis of Vedanta.

Fundamental Analysis of Vedanta – Industry Analysis

The demand outlook implies a notable surge in raw materials as the country pushes ahead with its efforts to build top-notch infrastructure and transitions to renewable energy, which in turn will require significant resources from the minerals and mining industries.

Short-term and long-term demand for natural minerals remains robust in India. Demand for primary aluminum and zinc is expected to increase by 16-17%. Demand is expected to remain strong going forward due to thriving infrastructure, manufacturing, automotive and EV/renewable energy sectors.

On average, global demand for these minerals is expected to grow by only 2% to 3%, while in India, this demand is expected to grow by nearly 5% to 9%. Due to upcoming projects and technological innovations such as AI, the semiconductor industry is also expected to grow exponentially by approximately 9% from 2024 to 2027. The industry will also grow due to the upcoming infrastructure development in India.

The upcoming renewable and electric vehicle industry is expected to see an estimated 66% increase in sales, with one-third of the country expected to use EVs and other renewable energy sources. This includes increased demand for non-ferrous and other metals.

Also read…

Fundamental Analysis of Vedanta – Finance

Sales and Net Profit

Vedanta’s operating revenue grew 10.98% at Rs. 1,32,732 (Cr) in FY 2022 to Rs. 1,47,308 (Cr) in FY2023 but at the same time the net profit decreased by 38.82% to Rs. 23,709 and in FY2023 it was Rs. 14,506.

The biggest reason why net profit decreases despite the increase in operating revenue is operating costs From 2022, it has been increased to Rs. 87,908 crore by FY 2023: Rs. 1,1287.7 billion won. Accordingly, interest expenses also increased by about 29.76% compared to fiscal 2022 to Rs. 4,797 crore by FY2023 from Rs. 6,225 crore directly impacted the company’s operations and net profit.

This may be partly due to subsidiaries such as Hindustan Zinc Ltd., which saw quarterly net profit decline 35% and fall short of expectations.

profit

As observed, EBIT margin fell from 28.45% in FY2022 to 17.99% in FY2023. Similarly, net profit margin also declined sharply from 17.86% in FY2022 to 9.85% in FY2023.

The main reasons for this rapid change are the increase in the company’s operating costs and interest expenses, and the company’s debt increases every year, resulting in higher interest rates for the company.

rate of return

Both return on equity and return on employed capital decreased compared to the previous year. RoE for FY2023 is 22.74% from 37.14% in FY2022, and RoCE for FY2023 is 19.89% from 29.37% in FY2022.

This may largely be related to the amount of debt they are taking on, which simultaneously reduces sales volume and profitability.

debt analysis

The company’s debt-to-equity ratio increased from 0.87 in 2022 to 1.15 in 2023. This means that almost 50% of its activities are financed by debt for both long-term and short-term activities.

While the debt ratio increased, the interest coverage ratio also decreased from 7.87 in 2022 to 4.26 in 2023. This means that the company is taking on more debt and its ability to repay is decreasing.

Fundamental Analysis of Vedanta – Key Indicators

Vedanta’s Fundamental Analysis – Future Plans

• Vedanta’s capacity expansion plans for 2024-25 are expected to bring significant changes to the business as the refinery expansion at Lanjigarh will be effectively completed by the end of FY2025.
• We are also accelerating the expansion of high-value products. We are increasing capacity in our rolled products business by adding billet capacity and capacity for cast alloys, which will increase from 44,000 metric tons to approximately 100,000 metric tons.
• Moreover, they are planning to expand the Balco smelter from basically 5,50,000 metric tons to 1 million metric tons.
• The company’s additional coal mines – Kuraloi, Radhikapur and Ghogharpalli are expected to start production in about 9-18 months.
• Debt restructuring was successful and the overall capital structure was structurally improved.
• The divestiture process is ongoing and the goal is expected to be achieved by the end of QI FY 2025. Division.
• In the oil and gas sector, we plan to pursue new growth investment projects worth $687 million.
• In the aluminum sector, we plan to increase investment by $1.4 billion over two years.

Read more: TVS Motors vs Hero Motocorp

conclusion

Vedanta’s fundamental analysis concludes that demand for non-ferrous metals is growing in India and other sectors, including the semiconductor industry, are also growing rapidly. There has also been a huge surge in demand from the renewable energy and EV industries.

Although the company is taking on debt to fund its operations, its main goal is to focus on growing and increasing capital expenditures. The division plan also suggests the company’s growth potential and various possibilities.

Written by Ritesh Balaji

By leveraging the Stock Screener, Stock Heatmap, Portfolio Backtesting and Stock Comparison tools on the Trade Brains portal, investors have access to comprehensive tools to identify the best stocks, stay updated and informed with stock market news. invest.

---

Start your stock market journey now!

Want to learn stock market trading and investing? Check out exclusive stock market courses from FinGrad, a learning initiative from Trade Brains. You can sign up for free courses and webinars from FinGrad and start your trading career today. Sign up now!!