Numbers

Claude View

The Numbers

Vedanta trades at 27x trailing earnings – a significant premium to every diversified mining peer – because the market is pricing in both a record EBITDA run-rate and demerger-driven sum-of-parts upside. The single metric most likely to rerate or derate this stock is aluminium cost of production: every $100/t move in COP at current volumes shifts annual EBITDA by roughly ₹5,500 crore. With COP at a 17-quarter low of $1,674/t and Q3 FY26 EBITDA at an all-time high, the question is whether structural cost improvements can hold as commodity prices mean-revert.

Share Price (₹)

761

Market Cap (₹ Cr)

297,424

P/E (TTM)

27.1

Dividend Yield (%)

5.78

EPS TTM (₹)

38.33

ROCE (%)

Net Debt/EBITDA

1.23

Revenue and Earnings Power

Revenue has climbed from ₹72,225 crore in FY17 to ₹152,968 crore in FY25, but the path is jagged – reflecting commodity price cycles rather than structural volume growth. Net income is far more volatile than operating income because interest expense of ₹9,000-10,000 crore/year amplifies every operating swing.

Q3 FY26 was a breakout quarter – revenue of ₹45,899 crore (up 19% YoY), EBITDA of ₹15,171 crore (up 34% YoY, all-time record), and PAT of ₹7,807 crore (up 60% YoY). The EBITDA margin expanded to 41%, the second-highest in the company's history.

Margin Cycle – Near Peak

Q3 FY26 EBITDA margin of 41% is at or near peak-cycle levels. The last time margins were this high (FY22: 34%), they mean-reverted sharply in FY23. Do not underwrite current margins as sustainable.

Segment EBITDA – Aluminium and Zinc Dominate

Aluminium and Zinc India together generate 83% of consolidated EBITDA. Everything else – oil and gas (in structural decline at 85 kboepd vs. 105 kboepd a year ago), power (nascent), iron and steel (subscale) – is either shrinking or too small to move the needle.

The Critical Chart: Aluminium Cost of Production

This is the single most important chart for Vedanta. The aluminium COP fell 11% YoY to $1,674/t in Q3 FY26 -- a 17-quarter low -- driven by lower power costs post-maintenance and increasing captive alumina (60% and rising). The EBITDA margin per ton hit a record $1,268/t. The Sijimali bauxite mine (H1 FY27) and Kuraloi coal mine (Q4 FY26) could push COP below $1,500/t, which would be transformational.

Cash Generation

Operating cash flow has trended steadily upward to ₹39,562 crore in FY25, but the gap to FCF has widened as growth capex climbs. Vedanta spent roughly $1.7 billion in annual capex on expansion projects (BALCO smelter, Lanjigarh refinery, Gamsberg Phase 2). FCF conversion from OCF was 58% in FY25, down from 71% in FY22. The payoff depends on these projects reaching scale in FY27-FY28.

FY25 FCF (₹ Cr)

22,848

FCF Margin

14.9%

FCF Yield

7.7%

Balance Sheet and Leverage

Gross debt rose from ₹53,583 crore in FY22 to ₹91,479 crore in FY25, driven by aggressive capex and massive dividend payouts. Reserves were gutted – from ₹65,011 crore (FY22) to ₹30,350 crore (FY24) – as payout ratios hit 357% (FY23) and 259% (FY24). This was the parent company extracting cash to service its own $4.8 billion debt.

Net Debt/EBITDA improved to 1.23x in Q3 FY26 (from 1.40x YoY) primarily because EBITDA surged, not because debt fell. Gross debt at Q3 FY26 was ₹80,709 crore with cash of ₹20,085 crore. The interest expense run-rate of ₹8,700-9,900 crore annually (~9% average cost) remains a material drag on net income.

Capital Allocation: Dividends vs Debt Paydown

Payout ratios of 357% (FY23) and 259% (FY24) are red flags – Vedanta paid out more in dividends than it earned, funded by borrowing. This pattern is driven by the parent company's debt obligations. FY25 at 113% is better but still above 100%. The 5-year cumulative dividend yield of 73.5% is extraordinary but came at the cost of balance sheet strength.

Shareholding Pattern

Promoter holding declined from 68.1% to 56.4% as Vedanta Resources sold down stake to fund its own deleveraging. FII holdings nearly doubled from 7.5% to 12.2%, and DII holdings rose from 10% to 15.3%. Increasing institutional participation is a positive signal for governance and liquidity.

Peer Valuation Comparison

No Results

Vedanta at 27x P/E trades at double the multiple of Hindalco (13x), Coal India (9x), and NMDC (11x). The premium reflects demerger optionality and high dividend yield. But on ROCE, Vedanta's 25% trails Coal India (48%), NALCO (44%), and NMDC (30%) – the penalty of carrying ₹91,000 crore in debt across a diversified structure.

The scatter reveals Vedanta occupies an uncomfortable middle – it commands a premium P/E without the ROCE to justify it. Coal India and NALCO offer better returns on capital at far cheaper valuations. The bull case for VEDL's premium rests entirely on the demerger unlocking hidden value and structural cost improvements in aluminium.

Commodity Sensitivity

Aluminium alone accounts for more than half the total commodity sensitivity. A 10% move in LME aluminium shifts annual EBITDA by $445 million (~₹4,000 crore). This is a one-commodity bet dressed up as diversification.

What the Numbers Confirm, Contradict, and Signal

The numbers confirm that Vedanta's operational execution is at a cyclical peak: record EBITDA, lowest costs in years, and improving leverage ratios. Cash generation is robust, and the aluminium cost curve position is genuinely strong.

The numbers contradict the narrative of a fundamentally cheap stock. At 27x P/E with ₹91,000 crore in gross debt and 113% payout ratios, this is a leveraged cyclical priced for perfection. The premium over every mining peer is hard to justify on fundamentals alone – the demerger option is embedded in the price.

Watch next quarter: Captive alumina percentage (target 80% by Q1 FY27), Sijimali bauxite mine commissioning, and whether Q4 FY26 EBITDA sustains above ₹14,000 crore. If aluminium COP breaks below $1,500/t, the bull case strengthens materially. If commodity prices correct while debt remains elevated, the downside is amplified by financial leverage.