Vedanta Aluminium wipes off Rs 25,000 cr worth investor wealth in under a month. Time to buy?

Touted as the 'crown jewel' of Anil Agarwal's Vedanta demerger, Vedanta Aluminium shares have emerged as the odd one out among the four newly listed companies. While its three demerged siblings have gained since their June 15 debut, the aluminium major has slipped 12% from its listing price of Rs 527, wiping out more than Rs 25,000 crore of investor wealth in less than a month.

The divergence in performance has been striking. Vedanta Power has gained 9% from its listing price of Rs 42, Vedanta Iron & Steel has surged 84% from Rs 22, while Vedanta Oil & Gas has advanced 10% from its listing price of Rs 39.

Decoding the fall

The sharp decline in Vedanta Aluminium shares has coincided with a correction in aluminium prices after Iran and the United States agreed to a peace deal.


Domestic brokerage InCred Equities believes the market's bullish view on aluminium is being built on the wrong framework. According to the brokerage, investors continue to value aluminium as a primary metal where supply appears tight. However, unlike commodities such as crude oil or coal, aluminium is an above-ground circular metal.

"Nearly 1.5 billion tonnes of aluminium remains available above the ground, and almost 80% of all aluminium ever produced is still part of the usable metal pool. Hence, the real question is not only primary smelter supply, but how quickly scrap can be collected, sorted, remelted and reintroduced into the supply chain," it said.

Also read: Vedanta Aluminium vs Power vs Oil & Gas vs Iron & Steel: Which stock should you buy?

Middle East disruption cools down

InCred also believes the disruption in the Middle East is likely to prove temporary rather than structural. Around 2.2 mtpa of primary aluminium capacity was affected, but supplies from Qatar Aluminium and Alba can normalise relatively quickly, while only EGA's Al Taweelah may remain a longer outage risk.

"As the war-risk premium unwinds, London Metal Exchange (LME) aluminium prices should correct despite low inventories and some regional premium tightness," the brokerage added.

Should you sell the crown jewel?

Despite the sharp correction, brokerages remain constructive on Vedanta Aluminium. Last week, Emkay initiated coverage on the stock with a Buy rating and a target price of Rs 550, implying a potential upside of 15% from current levels.

"We believe the market is yet to fully appreciate its structural earnings potential. We remain constructive on the medium-term aluminium outlook, with the global market likely to remain in deficit through CY28 despite Indonesia's announced capacity additions, given execution bottlenecks and China's effective 45 mt production cap," the brokerage said.

Structural demand for metal

Emkay remains positive on Vedanta Aluminium's medium-term outlook, citing a structurally tight global aluminium market. While Indonesia's planned capacity expansion has raised concerns over future supply, the brokerage believes constraints related to bauxite availability, alumina refining, power infrastructure and project financing will slow the pace of new capacity additions.

At the same time, China's aluminium production is nearing its effective capacity ceiling of 45 million tonnes, limiting fresh supply.

Demand, however, is expected to remain strong, driven by investments in power grid infrastructure, the energy transition and the increasing use of lightweight materials in automobiles.

As a result, Emkay expects the global primary aluminium market to remain in deficit through CY28, supporting higher aluminium prices and creating a favourable earnings environment for low-cost integrated producers such as Vedanta Aluminium.

Read more:Vedanta demerger: How will the mega restructuring impact dividend payouts for shareholders?

Cost curve improves

Vedanta Aluminium's next phase of earnings growth will increasingly be driven by structural cost reductions rather than higher aluminium prices.

According to the brokerage, the company is strengthening backward integration across bauxite mining, alumina refining, captive coal and power, while simultaneously expanding its smelting and refining capacities.

These initiatives are expected to reduce dependence on third-party raw materials, lower input cost volatility and improve operating leverage.

As captive bauxite and coal mines scale up and the Lanjigarh refinery moves towards full utilisation, Emkay expects Vedanta Aluminium to improve alumina self-sufficiency and structurally lower cash costs.

Supported by disciplined capital allocation and healthy cash flow generation, these measures are also expected to aid deleveraging, improve return ratios and reinforce the company's position as one of the world's lowest-cost integrated aluminium producers.

Favourable risk reward

Emkay values Vedanta Aluminium at 6x FY28E EV/EBITDA. The brokerage believes the market is underestimating the earnings potential from deeper backward integration, structurally lower costs and stronger free cash flow generation.

It identified weak aluminium prices, elevated energy costs, delays in integration and adverse regulatory developments as the key risks to its investment thesis. CLSA has also initiated coverage with an Outperform rating and a target price of Rs 540, implying an upside potential of more than 18% from the stock's previous closing price.

The brokerage said its positive stance is supported by a higher-for-longer aluminium cycle and robust operational tailwinds. "We expect backward integration to lift the company into the first decile of the global cost curve, along with near-term volume growth visibility. Strong FCF generation (even after assuming aluminium LME at a discount to spot) is likely to support deleveraging and dividend payout," it said.

Aluminium upcycle

CLSA said its bullish outlook is underpinned by resilient demand from electrification and substitution-led end markets, along with constrained supply growth, resulting in a tight market balance. The brokerage expects incremental aluminium supply to remain modest at 1.5 mt and 1.9 mt in 2026 and 2027, respectively, largely driven by additions in Indonesia.

New alternative

Copper's blistering rally to a record high in 2026 is beginning to reshape how manufacturers think about one of the world's most critical industrial metals. As soaring prices threaten margins, companies are increasingly turning to aluminium, a cheaper and lighter alternative, for applications that have traditionally relied on copper.

The copper-to-aluminium price ratio has climbed above 4.2, making aluminium a significantly more economical option for electrical wiring. Although aluminium offers around 61% of copper's electrical conductivity, its cost allows manufacturers to reduce material pressures by using thicker aluminium cables wherever design requirements permit.

Last month, Citi initiated coverage on Vedanta Aluminium with a Buy rating and a target price of Rs 560, naming the newly listed company its top Indian metals pick.

Citi cited a favourable aluminium outlook, growth opportunities through the BALCO expansion and Vedanta Aluminium debottlenecking, higher captive alumina, domestic bauxite and captive coal, along with improving leverage, as the key reasons behind its positive view. The brokerage expects the company to move to a net cash position by FY28.

For now, Vedanta Aluminium remains the only laggard among Vedanta's demerged entities, but analysts believe its long-term fundamentals, rather than the weak post-listing performance, will ultimately determine its trajectory.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)