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News Topical, Digital Desk : Vedanta New Price Target: Sanjay Parekh, Founder and Chief Investment Officer of Sohum Asset Managers, has issued a new price target for Vedanta. He maintains a positive outlook on Vedanta. Sanjay believes the proposed demerger could lead to a 10–14% increase in the company's stock based solely on the value unlocking.
Parekh said that Vedanta has been part of his portfolio for the past 18 months. Despite the sharp volatility, he has remained invested because the company's long-term value creation story remains strong. A
clearer picture will emerge after the demerger.
Vedanta currently trades at a valuation of approximately 5.5 times EBITDA, which Parekh believes does not fully reflect the true value of the company's individual businesses. After the demerger is complete, he expects each unit to operate independently, improving its strategic focus and potentially achieving higher valuation multiples.
He added that the aluminum business could command a higher valuation multiple after the separation. Furthermore, the power business, with a capacity of approximately 5,000 megawatts, also holds strong re-rating potential.
Based on a sum-of-parts valuation, Sanjay Parekh stated that his fair value estimate for Vedanta was in the range of ₹670–680 per share even before the demerger announcement. Now that the restructuring process has begun, he sees at least 10–14% additional upside in the stock. Regarding the ongoing legal proceedings related to the energy business and concerns about the corporate guarantees, Parekh stated that this is largely expected. According to him, disputes over certain costs are common in production-sharing contracts, and such guarantees are not unusual. While the total guarantee amount is large, it is not yet clear how much of it will actually be enforced. Even if a small portion is enforced, Parekh believes the impact on the stock will be limited and will not create a significant overhang. Parekh further explained what investors expect to hear from management going forward.
The company has paid a dividend of ₹90,000 crore. He acknowledged that Vedanta's journey has been challenging over the past few years, but despite this, the company has paid a dividend of approximately ₹90,000 crore. According to him, this demonstrates management's clear intent towards shareholder value creation. However, he also said that the market's biggest concern is large and unrelated expansions or acquisitions outside the core business. From a shareholder perspective, he believes that management should reassure investors that it will maintain a disciplined strategy and avoid aggressive moves that could weaken value. Meanwhile, Kotak Institutional Equities has raised its rating on Vedanta to 'Buy' and set a target price of ₹650. The brokerage has also increased its EBITDA estimates for the company.
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