Vedanta's Rs. 17,000 Crore JAL Bid Faces Analyst ‘Mismatch' Warning; Shares Climb 19% From 52-Week Low

Vedanta Limited is in the news currently for some major developments announced by the metal mining giant.One of the biggest updates is Vedanta's acquisition bid for Jaiprakash Associates (JAL), which is the flagship company of the Jaypee Group.

Vedanta has offered Rs. 17,000 crore for the deal, which will be paid in stages over five years to avoid putting too much pressure on the company's finances. The first payment of around Rs. 37-38 billion will happen after getting approvals from regulators, while the remaining amount will be paid in annual instalments of Rs. 27-33 billion.

However, some investors & analysts are cautious because JAL's businesses, like cement, real estate, hospitality, construction, power, and fertilisers, don't perfectly fit with Vedanta's main focus on metals and mining.

ICICI Securities in its note said, "JAL's current business portfolio is a mismatch vis-à-vis VEDL's current business. VEDL is also undergoing a demerger with the objective of providing a choice of commodity investment to its investors. In our view, it appears like the cart has been placed before the horse. At this point, our opinion is that VEDL may look to keep the power, real estate, construction and fertiliser businesses for them at best and may part with cement and other businesses (since the plant is far from existing steel/power businesses, the use of slag and fly ash does not seem to be an option)."

Vedanta Corporate Demerger

Vedanta is planning to split the company into four separate listed companies by the end of September. The main metals business will stay with the parent company, while other divisions will operate independently. Chairman Anil Agarwal says the goal is to make Vedanta a global leader in each of its businesses.

Vedanta Share Price Movement

Post the announcement of these developments, Vedanta shares traded in the red yesterday, declining around 2.4%. However, fresh buying activity in the stock this morning lifted investor sentiment, and the stock is recovering, currently trading up 0.05% at Rs. 434.50 at the time of writing.

Over the past 30 days, Vedanta stock has been range-bound, gaining only 1% due to volatile trading. In the last 12 months, the shares have posted modest gains, rising 5.5%. At the current market price, Vedanta shares are up approximately 19% above their 52-week low of Rs. 363 per share.

ICICI Securities maintains a "BUY" rating on Vedanta, citing a target price of Rs. 530. The broking firm predicts a 19% upside for the stock because of factors such as financial strength, operational scale, strategic demerger, and asset rationalisation plans. Potential macroeconomic tailwinds.

Vedanta Strategic Expansion on World EV Day

In other news, Vedanta has invested over Rs. 12,500 crore to expand production across aluminium, zinc, ferrochrome, and steel to support India's growing electric vehicle (EV) industry.

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