Vedanta Ltd. is one of India’s leading companies engaged in exploring, extracting, and processing minerals, oil, and natural gas.
Vedanta has the largest Aluminum installed capacity in India at 2.3 MTPA. It has a 47% market share in Aluminum production in India.
The revenue from different business segments is as below –
Let’s discuss what would be Vedanta’s share price in 2025 as per the experts, the company’s business fundamentals, and considering other factors.
Vedanta Share Price Target 2025
Vedanta’s current price is dancing between Rs 230 to Rs 235, similar to its trading range from five years ago.
In the last 3 years, the Vedanta stock has given a 22% return. But since January 2023, it has been showing a downward trend which is still there.
As per the experts, the Vedanta stock is expected to be around Rs 300 by 2025 as the high debt and inconsistent profitability would keep the stock to give limited returns.
Fundamental Analysis of Vedanta
Revenue growth: Over the last five years, Vedanta has shown a steady revenue growth of around 10%. The past three years have been even more exciting, with revenue leaping by an impressive 20%. Just to give you an idea, in 2020-21, the revenue stood at a substantial 88,021 crores, which skyrocketed to a staggering 147,308 crores in 2022-23.
Profit growth: The profit growth has seen a bit of a rollercoaster. Over the last five years, it’s been a modest 4%, but the last three years witnessed a 10% dip. For instance, from 15,032 crores in 2020-21, the profit climbed to 23,710 crores in 2021-22, only to take a dip to 14,503 crores in 2022-23.
High dividend payout: Vedanta is like that friend who never forgets your birthday – it’s been offering a consistent dividend yield of 43.5%. Plus, the company has been maintaining a healthy dividend payout of 159%. Sweet, right?
But the dividend is not the only thing you should consider while investing in a stock. The company is paying a high dividend even with a decline in profits.
That raises the question, Why does the company paying high dividends even with reduced profits?
Rise in debt: Vedanta’s net debt increased by Rs 13,900 crore during the last quarter due to sustaining capex and dividend payout, resulting in a decrease in the net debt/EBITDA ratio, showing a challenging picture for the company’s financial health.
Vedanta’s Technical Analysis
Vedanta’s stock was showing a sideways trend in the range of Rs 270 to Rs 300 for the last 6 months but now it’s showing a downtrend since its fall started from 1 Aug, 2023. That means the selling pressure is more powerful than the buyer’s support.
You can learn about the technical analysis from our guide on how to predict the next candlestick pattern for the stock price.
If you look at the technicals of the stock, Vedanta’s stock price is sailing above the EMA200 at 195 showing a “Buy” signal but, the price is still trading a tad below the EMA50 at 253, showing strong selling sentiments making it a “Neutral” sign.
However, RSI at 42.69 is also showing a “Sell” signal to give you an idea that the whole market sentiments are showing a further fall in the stock price.
Major Risks of Investing in Vedanta Shares
I. Lackluster Quarterly Performance
As of the March 2023 quarter, Vedanta experienced a significant setback in its operational revenue, witnessing a 5.4% decline, which amounted to Rs 372.3 Bn.
And, the company’s net profit plummeted by a substantial 67.5%, reaching Rs 18.9 Bn. This abrupt dip can be primarily attributed to an exceptional one-time charge of Rs 1,336 crore (windfall tax on the Rajasthan block) within its oil and gas business segment.
II. Reduced Promoter Stake
In March 2023, a notable event unfolded with the promoters divesting a 1.5% stake in the company. The cumulative promoter stake by the end of March 2023 settled at 68.1%.
It’s important to recognize that a promoter’s stake reflects their confidence in the company’s future trajectory. When promoters increase their holdings, it often signifies impending positive developments or substantial opportunities.
On the contrary, a stake sell-off raises concerns, suggesting that the promoters might lack confidence in the company’s business performance.
III. Persistent Foreign Institutional Investor (FII) Selling
The company’s value erosion has also been influenced by the consistent selling of shares by foreign institutional investors (FIIs).
Over the past three quarters, FIIs have continually reduced their holdings in Vedanta. In the June 2021 quarter, FII ownership accounted for 10.3%, which has since dwindled to 7.9%.
This ongoing reduction in FII ownership adds another layer of uncertainty, signaling the need for a discerning assessment of the investment landscape.
You can also read about other stocks’ target prices –
- Suzlon Share Price Target
- Tata Motors Share Price Target
- Tata Power Share Price Target
- Adani Power Shares Target Price
Conclusion
The Vedanta shares haven’t given any positive returns in the last 5 years and its stock has given a roller-coaster ride to the investors for the last 3 years.
If you look at the past 2 years’ performance, the stock had picked the momentum and crossed Rs 400 per share price, but after January 2023, it kept on falling.
As per the experts’ opinion, Vedanta’s share price target can be around 300 by 2025 based on all the air around.
Anyways, you must do your own research and seek professional experts before making any investment decisions.
FAQs
The company faced a challenging quarter with a 5.4% YoY decline in revenue to Rs 372.3 billion. The net profit also suffered a significant 67.5% YoY drop, amounting to Rs 1880 crores. This was primarily due to a one-time charge within the oil and gas business segment.
The promoters’ decision to sell a 1.5% stake in March 2023 brought the cumulative promoter stake down to 68.1%. An increase in promoter holdings often signals optimism for the company’s prospects. Conversely, a stake sell-off can be interpreted as reduced confidence in the company’s short-term performance.
Over the last three quarters, foreign institutional investors (FIIs) have consistently reduced their ownership in Vedanta. Their stake has decreased from 10.3% in the June 2021 quarter to 7.9% currently. This continuous reduction in FII ownership adds an element of uncertainty to the investment landscape for Vedanta.
While Vedanta’s substantial dividend yield might seem appealing, it’s important to note that elevated dividend payouts could strain the company’s cash reserves. This could potentially lead to increased debt levels, as observed in the past two quarters, which might impact the company’s financial health.
