Vedanta regains Rs 1-trillion m-cap; stock surges 7%, hits 3-year high

In the past six months, the stock has zoomed nearly 200 per cent on healthy and improving operating performance, supported by stable volume across business segments and increased commodity prices

Vedanta shares rallied 7 per cent and hit a three-year high of Rs 287.50 on the BSE in intra-day trade on Friday on healthy and improving operating performance, supported by stable volume across business segments and increased commodity prices.

The stock was trading at its highest level since May 2018. Vedanta was trading higher for the fourth straight day, surging 12 per cent in that period. In the past six months, the stock has outperformed the market by zooming nearly 200 per cent, as compared to 18 per cent rise in the S&P BSE Sensex.

A sharp run-up in stock price of Vedanta has seen the company regain market capitalisation (market-cap) of Rs 1 trillion. At 09:46 am, the scrip was trading 6 per cent higher at Rs 286 with the market-cap of Rs 1.06 trillion, BSE data showed.

On Monday, May 3, CRISIL Ratings assigned its ‘CRISIL AA-/Stable’ rating to non-convertible debentures (NCDs) of Vedanta (Vedanta; part of the Vedanta group) aggregating Rs 2,500 crore, while reaffirming its ‘CRISIL AA-/Stable/CRISIL A1+’ ratings on the bank facilities and other debt instruments.

Sustained production volume across businesses, improved efficiency in the aluminium business aided by lower input costs, and strong recovery in commodity prices have supported continued improvement in Vedanta’s operating profitability during fiscal 2021.

CRISIL Ratings estimates Vedanta’s earnings before interest, tax, depreciation and amortisation (Ebitda) to increase to above Rs 27,000 crore in fiscal 2021.

The reaffirmation also factors in timely refinancing of debt that is maturing in fiscal 2022 in the parent company, Vedanta Resources Ltd (VRL; rated 'B-/Stable' by S&P Global Ratings), in line with expectation.

Furthermore, with expected volume growth across businesses, sustained cost efficiencies and healthy commodity prices, Vedanta’s Ebitda is expected to improve to more than Rs 35,000 crore in fiscal 2022. However, the improvement in outlook for earnings is accompanied by increased debt at VRL that was incurred to purchase additional stake in Vedanta, CRISIL said in rating rationale.

India is currently experiencing an intense second wave of the Covid-19 pandemic. As company’s production consists of essential commodities (zinc, oil & gas, and steel) or fall under continuous process industries (aluminium), CRISIL Ratings does not expect any material impact on the company’s production. However, this along with any impact on supply chain shall remain a key monitorable.