Vedanta Demerger: Five Pure-Play Entities to Be Listed - ICICI Direct Research

After nearly three years since its initial announcement in September 2023, Vedanta's landmark demerger is now firmly on the runway. The company has announced 1st May 2026 as the record date for the demerger, which will result in the creation and eventual independent listing of five separate entities. This is a structurally significant development for one of India's most widely held natural resources conglomerates, and we believe it represents a meaningful value unlocking event for shareholders.

What is the Demerger Structure?

The demerger will be executed as a simple vertical split. For every 1 share of Vedanta Ltd held on the record date, shareholders will receive 1 share in each of the four newly created entities, in addition to retaining their existing shares in the residual Vedanta entity.

The five resulting listed entities are:

Vedanta Ltd (Residual Entity): The parent company post-demerger will retain Hindustan Zinc (Zinc India — zinc, lead and silver), Zinc International, Copper, Ferro Chrome, Nickel, and emerging ventures including displays and electronics. The residual Vedanta entity will derive the bulk of its value from its approximately 63.4% stake in Hindustan Zinc.
Vedanta Aluminium: This entity will manage all aluminium operations — the smelter plants at Jharsuguda and BALCO, the Lanjigarh alumina refinery, and captive coal and bauxite mines. Vedanta Aluminium will hold a 51% stake in BALCO. With India's largest primary aluminium capacity of approximately 2.8 MTPA and globally the 9th largest smelting capacity, this is the most operationally significant of the demerged entities. Among all the resulting businesses, Vedanta Aluminium stands out as the most attractive, supported by strong group revenue and EBITDA contribution, tight global aluminium supply, elevated metal prices, and ongoing capacity expansions.
Vedanta Power: This unit will operate Vedanta's thermal power assets, including Talwandi Sabo Power Plant (1,980 MW), Jharsuguda IPP (600 MW), Meenakshi (1,000 MW), and Atena (1,200 MW) — a total installed capacity of approximately 4,780 MW across plants.
Vedanta Oil & Gas: This entity will house Cairn Oil & Gas, India's largest private crude oil producer, contributing approximately 25% of India's total oil and gas output. This is a significant pure-play energy asset that has historically been obscured within the conglomerate structure.
Vedanta Steel & Ferrous: This entity will oversee iron ore operations in Karnataka, Goa and Odisha, as well as international iron ore assets in Liberia. It will also include the ESL steel business.

Stock Price Adjustment on Demerger

On 30th April 2026, Vedanta's stock price is expected to adjust for the demerger. The residual Vedanta entity is expected to trade in the indicative range of approximately ₹300–325 per share following this adjustment (vs. the pre-demerger price of approximately ₹720 per share). This estimate is indicative, as the exact allocation of net debt across the resulting entities is yet to be finalised.

The remaining demerged entities are expected to be listed on the stock exchanges within 1–2 months following the record date.

Why this is a Value Unlocking Event?

Vedanta has long traded at a conglomerate discount — a common market dynamic where diverse businesses bundled together in a single listed entity attract lower valuation multiples than they would as standalone pure-play companies. The demerger is specifically designed to address this by allowing each business to attract focused investors, sector-specific valuations, and independent capital allocation strategies.

We believe the high-growth Aluminium and Power businesses, in particular, are likely to attract meaningfully better valuations as independently listed entities compared to their implied value within the current conglomerate structure. Vedanta Aluminium's EBITDA per tonne trajectory — moving from $870/ton in FY23 to an estimated $1,564/ton in FY27E — and the aluminium industry's tight global supply dynamics underpin this view.

Segment-Wise Operating Assumptions

Aluminium: Sales volumes are expected to grow from 2,415 KT in FY23 to 2,615 KT in FY27E, with blended realisations expanding from $2,698/ton to $3,205/ton over the same period. EBITDA per tonne is estimated at $1,564 in FY27E — a substantial improvement from the $870/ton in FY23.

Zinc India (Hindustan Zinc): Refined zinc volumes are expected at 860 MT in FY27E, with Revenue of ₹48,101 crore and EBITDA of ₹28,602 crore. EBITDA margins for Hindustan Zinc are estimated at 59.5% in FY27E — among the best in the global zinc industry.

Power: Sales volumes are projected to grow from 12,911 MU in FY23 to 19,367 MU in FY27E, with average realisation improving to ₹4.3/unit.

Iron Ore and Steel: Iron ore sales volumes are expected to recover to 7.1 MT in FY27E, while steel volumes are projected at 1,750 KT with EBITDA per tonne estimated at $50.

Oil & Gas: FY27E EBITDA is estimated at ₹5,899 crore, valued at 4x EV/EBITDA in our SoTP framework.

Consolidated Financial Outlook (FY25–FY27E)

Metric	FY24	FY25	FY26E	FY27E
Total Operating Income (₹ crore)	1,43,727	1,52,968	1,76,076	2,14,232
EBITDA (₹ crore)	35,198	42,523	55,118	78,088
EBITDA Margin (%)	24.5	27.8	31.3	36.5
PAT post Minority (₹ crore)	4,239	14,988	21,638	34,761
EPS (₹)	11.4	38.3	55.3	88.9
RoCE (%)	18.8	21.3	28.5	41

Total operating income is expected to grow at a 2-year CAGR of 18.3% over FY25–27E, while EBITDA is expected to grow at 35.5% CAGR over the same period, reflecting improving metal realisations, volume growth and operating leverage. Total debt is expected to reduce from ₹73,853 crore in FY25 to ₹55,853 crore in FY27E, with the Debt/EBITDA ratio improving from 1.7x to 0.7x.

SoTP Valuation: Breakdown Across Entities

Our Sum-of-the-Parts valuation for all resulting entities combined is based on FY27E EBITDA and appropriate EV/EBITDA multiples for each business:

Entity	FY27E EBITDA (₹ cr)	EV/EBITDA (x)	Vedanta Stake	Apportioned EV (₹ cr)
Vedanta Aluminium	26,625	6.0x	100%	1,59,753
BALCO	10,178	6.0x	51%	24,915
Hindustan Zinc	28,602	8.0x	61%	1,11,113
Zinc International	1,943	5.0x	100%	9,714
Oil and Gas	5,899	4.0x	100%	23,595
Power	1,704	6.0x	100%	10,223
Iron Ore	1,933	4.0x	100%	7,731
Steel	788	4.0x	96%	2,407
Copper	20	4.0x	100%	80
FACOR	160	4.0x	100%	640
Total Enterprise Value				3,50,170
Less: Net Debt				29,781
Implied Market Cap				3,20,388

The implied SoTP valuation across all entities combined works out to ₹820 per share based on 391 crore equity shares.

Key Risks

Two risks warrant monitoring. First, lower-than-built-in metal realisations — the commodity price environment remains volatile given ongoing geopolitical tensions, and a meaningful correction in aluminium or zinc prices would impact both revenue and EBITDA assumptions across the key entities. Second, delays in ramping up new capacities and mines — Vedanta's growth projections are contingent on timely commissioning of expanded aluminium capacity and mining volumes; any slippage here would impact volume-driven earnings growth.

Frequently Asked Questions (FAQs)

Q1. What is the Vedanta demerger and when was it announced?

Vedanta announced plans to demerge its diversified businesses into five independently listed pure-play entities in September 2023. The demerger has now been formalised with 1st May 2026 announced as the record date.

Q2. What will shareholders receive in the demerger?

For every 1 share of Vedanta Ltd held on the record date (1st May 2026), shareholders will receive 1 share each in the four newly created entities — Vedanta Aluminium, Vedanta Power, Vedanta Oil & Gas, and Vedanta Steel & Ferrous — in addition to retaining their existing shares in the residual Vedanta entity.

Q3. What businesses will the residual Vedanta entity retain?

The residual Vedanta entity will house Hindustan Zinc (Zinc India — zinc, lead and silver), Zinc International, Copper, Ferro Chrome, Nickel, and emerging ventures including displays and electronics. The bulk of its value will be derived from its approximately 63.4% stake in Hindustan Zinc.

Q4. Which of the demerged entities is considered the most attractive?

Based on our analysis, Vedanta Aluminium stands out as the most attractive among the demerged entities, supported by its strong contribution to group revenues and EBITDA, India's largest primary aluminium capacity, tight global supply dynamics, elevated aluminium prices, and an improving EBITDA per tonne trajectory estimated at $1,564/ton in FY27E.

Q5. When will the demerged entities be listed on the stock exchanges?

The remaining demerged entities are expected to be listed within 1–2 months following the 1st May 2026 record date.

Q6. What is the expected stock price adjustment on demerger?

On 30th April 2026, Vedanta's stock price is expected to adjust for the demerger. The residual Vedanta entity is expected to trade in the indicative range of approximately ₹300–325 per share following this adjustment. This estimate is indicative and subject to finalisation of net debt allocation across the resulting entities.

Q7. What is Vedanta's consolidated financial trajectory?

Total operating income is expected to grow at a 2-year CAGR of 18.3% over FY25–27E to ₹2,14,232 crore, while EBITDA is expected to grow at 35.5% CAGR to ₹78,088 crore. EBITDA margins are expected to expand from 27.8% in FY25 to 36.5% in FY27E. Total debt is expected to reduce from ₹73,853 crore in FY25 to ₹55,853 crore in FY27E.

Q8. What is the SoTP valuation for all resulting entities combined?

Our Sum-of-the-Parts valuation for all resulting entities combined, based on FY27E EBITDA and appropriate sector multiples, implies a total enterprise value of ₹3,50,170 crore. After deducting net debt of ₹29,781 crore, the implied market cap works out to ₹3,20,388 crore across 391 crore equity shares.

Q9. Why is the demerger expected to unlock value?

The demerger is designed to eliminate the conglomerate discount that typically applies to diversified holding companies. By creating independently listed pure-play entities, each business can attract focused investors and sector-appropriate valuations. High-growth businesses such as Aluminium and Power are expected to command meaningfully better standalone valuations compared to their implied value within the current conglomerate structure.