Buy Vedanta; target of Rs 375: ICICI Direct

ICICI Direct is bullish on Vedanta has recommended buy rating on the stock with a target price of Rs 375 in its research report dated April 19, 2018.

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April 19, 2018 / 18:46 IST

26 Aug, 2025 12:21

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ICICI Direct's research report on Vedanta

The National Company Law Tribunal (NCLT), Kolkata Bench, has approved the terms of the resolution plan submitted by Vedanta, to acquire Electrosteel Steels under the Insolvency and Bankruptcy Code (IBC) 2016. Pursuant to the resolution plan, a wholly-owned subsidiary of Vedanta, will subscribe to the share capital of Electrosteel for an aggregate amount of Rs 1805 crore and provide additional funds of Rs 3515 crore by way of debt. Upon implementation of the resolution plan, Vedanta will hold ~90% of the paid-up share capital of Electrosteel while the remaining 10% of share capital will be held by Electrosteel’s existing shareholders and financial creditors who will receive shares in exchange for the debt owed. The funds received by Electrosteel (Rs 5320 crore) will be used to fully settle the debt obligations of the existing financial creditors. The completion of the transaction is subject to regulatory approval including approval from the Competition Commission of India (CCI) and Securities and Exchange Board of India (Sebi). Vedanta’s management has indicated the transaction will not have a material impact on the earnings for FY19 with returns being generated in following years.

Outlook

However, the additional capex incurred coupled with working capital requirement will determine the final EV/tonne. Thus, we maintain our earlier assumptions/ estimates. Vedanta has a healthy balance sheet and prudent capital al location strategy, which augurs well over a longer term horizon. We maintain our BUY recommendation on the stock with a target price of Rs 375.

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