Vedanta has acquired several other companies through IBC such as Electrosteel Steels Ltd, Ferro Alloys Corporation Ltd, Nicomet Industries Ltd, and has considerable experience turning around loss-making units. While JAL may be an attractive proposition, Vedanta could face pressure on its finances considering the ongoing expansion, creating concern among investors.
Vedanta’s bid for JAL would need approval from the committee of creditors and then the National Company Law Tribunal, which may take 10-12 months. As per various estimates, it would be required to make an upfront payment of about ₹4,000 crore, out of a total of ₹17,000 crore, on receiving the final approval, and the rest within five years. Financial creditors had total claims of over ₹57,000 crore against JAL, which means Vedanta could be receiving the asset at an attractive price.
“Though asset value is likely to exceed ₹17,000 crore, it needs to be developed before monetising, which may take 1-2 more years post-acquisition,” said Nuvama Institutional Equities in a 6 September report.
Generating synergies
JAL has a wide-ranging business portfolio across construction, real estate, fertilizers, cement, hotels, power etc. Fertilizers, construction and real estate accounted for 45%, 32% and 15% of the total revenue of ₹6,600 crore in FY24, respectively.
The company had been making losses for several years, primarily a result of borrowings-led expansion in its real estate business. Its real estate assets include about 4,000 acres of land in Delhi-NCR.
Besides its presence in power generation, Vedanta is also setting up a 0.5 million tonnes per annum (mtpa) fertilizer plant through its subsidiary, Hindustan Zinc Ltd which should generate synergies with JAL’s existing 0.72 mtpa urea plant.
Other segments do not align with Vedanta’s line of business and it may decide to divest some of these. “At this point, our opinion is that Vedanta may look to keep the power, real estate, construction and fertiliser business to them at best and may part with cement and other businesses,” noted ICICI Securities.
Yet, the company runs the risk of stretching its finances with a significant amount of debt in its books, as well as its parent, Vedanta Resources plc, and a large capital expenditure (capex) plan. The debt overhang had compelled it to propose the sale of its steel business, which was called off after an improvement in financial conditions.
“Getting into unrelated businesses at this point of time when priority should be deleveraging is a cause of concern,” said Nuvama.
Its total capex plan stands at nearly ₹82,000 crore, of which, it has spent about ₹33,000 crore till the end of the June quarter (Q1FY26). With a large number of projects expected to get commissioned by FY28, Vedanta can see its leverage ratio rise sharply.
Vedanta’s consolidated Q1FY26 Ebitda fell marginally year-on-year to ₹9,900 crore, as against 39% growth in FY25, weighed down by lower commodity prices and subdued volumes for some of its segments. Volatility in commodity, and oil & gas prices remains a key risk for the company, despite having strong cash flows.
Vedanta’s shares have been down around 5% over the past one year, weighed down by the ongoing demerger exercise. The stock trades at an enterprise value of 4.95x its FY26 Ebitda, shows Bloomberg, and looks attractively priced. Investors would wait for the completion of value-unlocking exercise through demerger for further cues.
