Vedanta's Stock Plummets 63% Amid Major Demerger Adjustment
Significant Stock Decline Following Demerger
On Thursday, Vedanta's shares experienced a staggering decline of approximately 63%. However, this drop was not a result of panic among investors but rather a technical correction linked to the company's long-awaited demerger, which has separated its key business segments into distinct entities. The stock opened at Rs 289.50 on the NSE after a special pre-open session, reflecting its new structure. The significant decrease in Vedanta's share price is attributed to the removal of four major divisions—Vedanta Aluminium, Vedanta Power, Vedanta Oil & Gas, and Vedanta Steel & Iron Ore—from its core operations. With these segments now separated, the company's valuation has been adjusted accordingly. Following this adjustment, Vedanta's market capitalization is now over Rs 1.13 lakh crore, a notable reduction from its previous valuation of more than Rs 3 lakh crore. The price discovery occurred during a special pre-open session (SPOS) from 9:15 am to 9:45 am, with regular trading resuming at 10 am.
Details of the Demerger and Record Date
Led by Anil Agarwal, the conglomerate initially designated May 1 as the record date for the demerger. However, due to the Maharashtra Day market holiday, April 30 became the effective cut-off date. This restructuring is one of the largest in India's metals and mining industry. Shareholders eligible for the scheme will receive one share in each of the four newly established entities—Vedanta Aluminium Metal (VAML), Talwandi Sabo Power (TSPL), Malco Energy, and Vedanta Iron and Steel—for every Vedanta share they own. The listing dates for these new companies have yet to be announced. Following the split, Vedanta is anticipated to remain part of the Nifty Next 50 index, while the newly formed entities will initially be classified as dummy constituents until their official listing. Adjustments to Vedanta's weight on global indices like MSCI Emerging Markets and FTSE will occur automatically.
According to market capitalization estimates, Vedanta and Vedanta Aluminium are likely to be categorized as large-cap stocks, whereas Vedanta Power, Vedanta Oil & Gas, and Vedanta Steel & Iron Ore will be classified as small-cap stocks. The demerger process for the company began in 2023 and encountered several revisions and regulatory challenges before receiving approval from the National Company Law Tribunal in December of the previous year. The restructured Vedanta will maintain its zinc and silver operations through Hindustan Zinc and will serve as a foundation for future growth initiatives.
Strong Q4 Financial Performance
Despite the restructuring, Vedanta reported impressive financial results for the March quarter. The consolidated net profit soared by 92% year-on-year to reach Rs 6,698 crore, while revenue increased by 47% to Rs 24,609 crore. The company also achieved its highest-ever EBITDA of Rs 18,447 crore, reflecting a 59% rise, with margins significantly expanding.