Vedanta shares in focus as parent looks to move KCM to company at 'right valuation'

Shares of Vedanta would be in focus on Wednesday morning after Anil Agarwal said parent Vedanta Resources may move Konkola Copper Mines (KCM), one of the world’s largest copper mines from the Zambian government, to the India-listed company at right valuation.

In a tweet on X (formally Twitter), Agarwal said: "Going forward, my thought is that we must maximise synergies between KCM and Vedanta Ltd's refining/smelter businesses in UAE & India. KCM can be moved from Vedanta Resources to Vedanta Ltd at the right valuation," he said.

At present, India is 90 per cent dependent on imports for copper concentrate and 40 per cent dependent on imports for finished copper.

"Copper is a key metal for world's decarbonization. Demand is growing rapidly. In India, growth is over 20 per cent annually. Vedanta acquired KCM in 2004 and made good profits when global copper prices were only $4,000. Now, global copper prices are around $8,500 and technologies are much superior so profitability will be much higher," he added.

He further called on the need to maximise synergies between KCM and Vedanta Ltd's refining or smelter businesses in UAE and India. "We can create a fully integrated copper vertical and eventually, a successful global copper company, like Chile's Codelco and Mexico's Southern Copper. We have other big projects coming up in the copper blocks that we have won in auctions and smelters in international geographies," he said.

As per Vedanta, KCM has resources and reserves of 16 million tonnes of contained copper. It has a copper grade of 2.3 per cent.

Vedanta Resources’ high leverage and funding gap of $3 billion in FY2025 are key areas of concern and overhang, Kotak Institutional Equities said this week. It noted that the Vedanta parent has largely addressed the funding gap of FY2024 through various one-time measures, including a 6 per cent stake sale in Vedanta but said the $2.2 billion bonds maturity in FY2025 is a taller hump.

"We note that large dividends are no longer possible and Vedanta Resources might be forced to further divest stake/assets in Vedanta. The bleak commodity cycle suggests a downside risk to earnings. We have trimmed earnings and fair value to Rs 200 from Rs 215. Maintain SELL, given the unfavourable risk-reward," Kotak said on Vedanta earlier this month.

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