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Vedanta Share Price Dips 8.96% as Q1 FY24 Profits Decline and Stake Sale Looms

Summary

Vedanta share price saw its drop by 8.96% to Rs 247.80 as its Q1 FY24 consolidated net profit fell by 40% to Rs 2,640 crore compared to the previous year. The decline was triggered by news of a stake sale by top shareholder Twin Star Holdings, aimed at repaying debt for parent company Vedanta Resources. Despite this, Vedanta has impressively reduced its debt by $3 billion within 14 months. The broader Indian equity market also suffered a decline, led by banking, financial, technology, consumer, realty, and energy sectors.

Vedanta Share Price Faces Turbulence: Profits Slide and Stake Sale Buzz Roils Market

Vedanta, a prominent player in the metals industry, faced a significant setback in its stock performance, witnessing a sharp 8.96% plunge to Rs 247.80 from the previous day’s close at Rs 272.20. This drop comes in the wake of a worrisome 40% dip in the company’s consolidated net profit for Q1 FY24, amounting to Rs 2,640 crore, a noticeable decline from the Rs 4,421 crore reported in the corresponding period last year.

Adding to the turmoil, Vedanta’s primary stakeholder, Twin Star Holdings, disclosed its intention to divest a 4.30% stake in the company. This move, aimed at alleviating the debt burden of Vedanta Resources, has sent ripples through the market, contributing to the downward trajectory of Vedanta’s shares. The offered price for the shares in this stake sale was set at Rs 258.50 apiece, further influencing the stock’s valuation.

It’s noteworthy that Vedanta’s official stance on this potential stake sale is yet to be articulated. The day’s trading on the Bombay Stock Exchange (BSE) exhibited exceptionally high activity, with a trading volume of about 1.68 crore shares—far surpassing the two-week average of 5.57 lakh shares. The total turnover on the exchange stood at Rs 431.19 crore, contributing to the company’s market capitalization of Rs 94,063.66 crore.

Digging deeper into Vedanta’s financials, the company’s shareholding pattern as of June 2023 indicated that promoters retained a sizable 68.11% stake in the firm. As for its financial health, Vedanta revealed a net debt of approximately Rs 59,200 crore for Q1 FY24, with the net debt-to-EBITDA ratio rising to 1.88 times during the June quarter, compared to 1.28 times in the previous quarter.

In a positive stride, Vedanta highlighted its achievement of reducing debt by $3 billion within a span of 14 months, following its announcement in February 2022 to expedite deleveraging and target a $4 billion debt reduction within three years. This accomplishment marks a substantial 75% progress towards the set debt reduction goal.

Amidst these developments, the broader Indian stock market witnessed a continued decline during afternoon trading. The downward trend was largely driven by the underperformance of banking, financial, technology, consumer, realty, and energy sectors, contributing to the overall market sentiment.

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