Which Vedanta Spin-Off Picks Up First: Aluminium or Power?

Regulatory risk is the third filter. The Vedanta group faces multiple investigations. The Enforcement Directorate raided Vedanta Group offices over FEMA violations, adding uncertainty around potential penalties. The aluminium and oil & gas units, being the largest, are most exposed to any group-level fallout. The power and steel entities, being smaller and more domestically focused, may face less scrutiny.

Valuation is the final piece. On listing day, each stock traded at a different discount to the implied value from the scheme. Some entities may have been undervalued due to the complexity of the spin-off. Others may have been bid up by index funds forced to buy. Comparing each entity's market cap to its peer group gives a rough guide. Vedanta Aluminium trades at a discount to Hindalco on an EV/EBITDA basis, while Vedanta Power trades at a premium to NTPC.

No single stock fits every portfolio. A conservative investor might prefer the retained Vedanta Ltd, which holds the diversified zinc and silver business with lower debt and a track record of dividends. A growth-oriented investor could look at Vedanta Aluminium, betting on a multi-year commodity upcycle and global supply constraints. An income-focused investor might consider Vedanta Power for its steady cash flows and potential for dividend payouts.

The demerger unlocks value by letting the market price each business separately. It also introduces complexity. Investors now need to track five sets of quarterly results, five debt profiles, and five sets of regulatory risks. The next concrete catalyst is the first standalone quarterly report from each entity, due in August. That will show whether the operational performance matches the spin-off thesis.