Vedanta Aluminium Up 3% on Analyst Nods: What's Behind the Upside

Vedanta Aluminium shares jumped more than 3% on Thursday after Citi and Kotak Institutional Equities started coverage with Buy ratings. Both brokerages see the stock offering up to 29% upside from current levels, driven by strong aluminium demand, low-cost power, and the potential for the demerged aluminium unit to trade at a premium to the current conglomerate valuation.

Citi initiated with a target price implying the aluminium business alone is worth significantly more than the group's current market cap, according to a note reviewed by AlphaScala. Kotak also highlighted Vedanta Aluminium's integrated operations – from bauxite mining to smelting – as a structural cost advantage versus peers that rely on purchased alumina or expensive grid power. The two calls pushed the stock to its highest level in two weeks, though volume remained below the 30-day average, suggesting the move was driven by positioning rather than fresh accumulation.

The analyst endorsements come at a pivotal moment for the parent company. Vedanta Ltd is pursuing a demerger that would list its aluminium, oil & gas, zinc, and iron ore businesses separately. The plan has faced legal and timeline uncertainty since a Supreme Court ruling in March cleared a creditor's resolution plan for a group entity, delaying the restructuring. In that context, the bullish initiation on the aluminium unit reads as a bet that the separation will eventually happen and that the metal business will command a higher multiple on its own. The stock is still down 64% from its 2022 peak, largely because of the demerger overhang.

The aluminium sector itself is seeing a tailwind. Global primary aluminium demand rose 4% year-on-year in the first half of 2025, according to industry data, driven by China's solar manufacturing and India's infrastructure spending. Supply is tight because of smelter curtailments in Europe and China's output cap. London Metal Exchange aluminium prices have held above $2,400 per tonne in recent months, above the breakeven for most Indian producers. For Vedanta, which runs a 2.4-million-tonne smelter complex in Odisha, every $100 per tonne move in LME aluminium swings earnings before interest, tax, depreciation and amortisation by about ₹1,800 crore, company filings show.

Kotak's note emphasized cost control. Vedanta Aluminium's power cost is roughly 15% lower than the industry average because of captive coal and the recently commissioned 1,600 MW thermal plant. That advantage widens when imported coal prices climb. The brokerage also pointed to the company's plan to expand downstream capacity, which would capture more of the value chain and reduce exposure to commodity price swings.

Risks remain. A sharp downturn in global aluminium prices – possible if China's property crisis deepens or new smelting capacity comes online faster than expected – would compress margins quickly. The demerger timeline is unconfirmed; the company's board has not set a record date. Until that happens, the conglomerate discount will persist. Friday's move snapped a three-session losing streak but left the stock 12% below the high it touched in early April after the company reported a 23% rise in aluminium production for the March quarter.

For traders watching the metal space, the Citi and Kotak initiations add a new lens: valuing Vedanta's businesses on a sum-of-parts basis. The next concrete test is the June quarter production data, due in early July, and any update on the demerger from the board.