At a Glance
Vedanta looks like every value investor’s dream — 38% ROE, 25% ROCE, and a mouth-watering 9.8% dividend yield. But before you get too excited, remember: 100% promoter shares are pledged, cash flows are under pressure, and the holding company structure is shakier than a Jenga tower in an earthquake.
🏭 1. Vedanta = India’s OG Resource Mafia
From aluminium to oil, zinc to power — Vedanta has its claws in every corner of the periodic table.
- 🎖️ India’s largest aluminium producer (46% market share)
- ⛽ Major player in oil & gas via Cairn
- ⚡ Also generates power commercially
- 🌍 Footprint across India, South Africa, Namibia, UAE, Korea, and Taiwan
- 🧬 Other businesses: steel, port ops, even glass substrates in Asia
📦 Segment Revenue (9M FY25):
- Aluminium: 38%
- Zinc: ~32%
- Oil & Gas: 11%
- Power + Others: 19%
Basically, Vedanta = if ONGC, Hindalco, Hindustan Zinc, and JSW Steel had a chaotic family reunion.
📊 2. Financial Biryani: Spicy, Heavy, Unpredictable
| Metric | FY20 | FY25 | Growth |
|---|---|---|---|
| Revenue | ₹84,447 Cr | ₹1,52,968 Cr | 1.8x |
| Net Profit | ₹(4,744) Cr | ₹20,535 Cr | 🪄 Comeback King |
| EPS | ₹(17.9) | ₹38.33 | 💥 |
| ROE | Negative | 38.5% | 📈 |
| Dividend Payout | NA | 113% | 🫡 Generous Uncle Vedu |
🔄 FY25 Profit Rebound after weak FY23-FY24, thanks to zinc prices and O&G uptick
💰 Operating Profit (FY25): ₹42,343 Cr
📉 Profit CAGR (5Y): -1% (yes, negative)
📈 Stock CAGR (5Y): 32% (dividend love is real)
🔴 3. Pros, Cons & Plot Twists
✅ Pros
- 💸 Cash Cow with ₹40,000+ Cr EBITDA
- 🎯 High ROCE (25%) & ROE (38%) — capital is working hard
- 🤑 Highest dividend yield among Nifty Next 50
- 🧾 OPM stabilizing at 25–28% after a volatile few years
❌ Cons
- ⚠️ 100% promoter pledge 😬
- 📉 Promoter holding down from 69% → 56% in 2 years
- 💣 FY23–24 saw huge drop in net profit due to commodity cycles
- 🧯 Cash flows barely keeping up with dividend outflows
- 🏦 ₹91,479 Cr in borrowings — and still rising
🧮 4. Segment Deep Dive: Who Pays the Bills?
| Segment | Margin | Commentary |
|---|---|---|
| Aluminium | 16-18% | High volume, power-intensive, price-sensitive ⚙️ |
| Zinc | 40%+ | Margin king 👑, driven by Hindustan Zinc |
| Oil & Gas | 20–25% | Lumpy profits, dependent on Brent 🛢️ |
| Power | 12–14% | Steady but capital-guzzling |
| Others | NA | Too many small bets, little impact |
⛏️ Aluminium is the top-line engine.
💰 Zinc is the bottom-line saviour.
🛢️ Oil is the wild card.
💣 Power is the capital sink.
📉 5. Balance Sheet: The Good, The Bad, The Leveraged
- 🧱 Book Value: ₹105
- 💰 Debt: ₹91,479 Cr
- 🪙 Cash from Operations FY25: ₹39,562 Cr
- 📉 P/B: 4.2x
- 💣 Net debt increasing despite profits — due to payouts + capex
- 🪤 Investments + CWIP: ₹48,428 Cr — no free cash for debt repayment
Translation: ROE is coming from leverage and payout, not reinvestment.
💸 6. Valuation: Dividend Magnet or Value Trap?
Method 1: Peer-Based P/E
- Sector average P/E = 10–12
- Vedanta’s EPS FY25 = ₹38.33
- FV = ₹38.33 × 11 = ₹421.6
Method 2: Yield-Based Valuation
- Target sustainable dividend = ₹30
- Target yield = 7%
- FV = ₹30 / 0.07 = ₹428
🎯 EduInvesting FV Range: ₹420 – ₹430
(CMP ₹442 → Slightly overvalued if no earnings growth, undervalued if metal rally continues)
🧠 7. Edu Verdict: Baap of Dividend, Beta of Risk
Vedanta is the equity version of an FD on steroids — juicy payouts, fat margins, and every risk you didn’t ask for.
✅ Own it if:
- You want dividends, not drama
- You believe in metal supercycles
- You trust that the promoter won’t default (again)
❌ Avoid it if:
- You get nightmares from pledged shares
- You need steady earnings, not zinc-driven mood swings
- You remember Anil Agarwal’s earlier delisting attempt 💀
✍️ Written by Prashant | 📅 June 26, 2025
📌 Tags: Vedanta, Hindustan Zinc, Dividend Stocks, Metal Stocks, Aluminium, Commodity Cycles, Promoter Pledge, ROE, EduInvesting Fair Value, PSU vs Vedanta
