Why Is Nuvama Bullish on Vedanta Despite the Recent Rally?
Vedanta Business Overview
Vedanta Limited is a diversified natural resources company with operations spanning aluminium, zinc, oil and gas, iron ore, steel, and power. The company’s integrated asset base and commodity-linked earnings profile make it a leveraged play on global metal and energy cycles. Over recent years, Vedanta has also focused on balance sheet optimisation, cost efficiency, and value unlocking through structural initiatives.
According to Nuvama, the current market price does not fully reflect the earnings power of Vedanta’s aluminium and zinc businesses, effectively implying that the remaining businesses are being valued at negligible levels.
Key Takeaways From Nuvama’s Upgrade
🔹 Target price raised to ₹806 from ₹686.
🔹 FY27E and FY28E EBITDA estimates increased by 17 percent and 8 percent respectively.
🔹 Commodity prices assumed to remain structurally higher than historical averages.
🔹 EBITDA expected to grow at a 20 percent CAGR over FY25–FY28.
Nuvama believes that aluminium and zinc price assumptions embedded in current valuations remain conservative, especially in the context of global supply discipline and rising demand from energy transition-related applications.
For traders tracking commodity-led momentum and index alignment, insights from Nifty Tip can help contextualise sectoral moves.
3D SWOT — Strengths and Weaknesses
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🔹 Diversified commodity portfolio 🔹 Low-cost zinc assets 🔹 Strong operating leverage |
🔹 High cyclicality 🔹 Regulatory overhangs 🔹 Capital allocation sensitivity |
The company’s exposure to multiple commodities amplifies both upside during favourable cycles and downside during corrections, reinforcing the importance of disciplined capital management.
3D SWOT — Opportunities and Threats
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🔹 Demerger-led value unlocking 🔹 Sustained commodity upcycle 🔹 Cost reduction initiatives |
🔹 Commodity price volatility 🔹 Policy and ESG risks 🔹 Global slowdown concerns |
Nuvama highlights that Vedanta is in the final stages of securing statutory approvals for its proposed demerger into five separately listed entities, a move that could significantly improve transparency and valuation discovery.
Valuation and Investment View
At current levels, Nuvama believes the market is underestimating Vedanta’s medium-term EBITDA trajectory. With higher commodity price assumptions, cost efficiencies, and structural simplification through demerger, the risk-reward remains favourable.
Active traders often align such structural stories with broader market trends using BankNifty Tip to manage volatility.
Investor Takeaway
Derivative Pro & Nifty Expert Gulshan Khera, CFP®, notes that Vedanta represents a classic cyclical value-unlocking opportunity where earnings upgrades and corporate restructuring could converge. Investors should, however, remain mindful of commodity volatility and regulatory risks while tracking execution on the demerger roadmap.
For ongoing analysis and sectoral insights, readers can explore resources at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services platform.
Related Queries on Vedanta and Commodity Stocks
Why is Vedanta planning a demerger?
How do aluminium and zinc prices affect Vedanta?
Is Vedanta undervalued versus peers?
What risks should investors track in commodity stocks?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
