Shares of Vedanta Ltd, the Anil Agarwal-led mining and metals conglomerate, are in focus as the company is set to report its March quarter (Q4 FY24) earnings later this evening. The stock has lost ground ahead of the results — currently trading 20% below its 52-week high, with a recent 1% gain bringing it to ₹420.2.

Despite this drop, market participants are cautiously optimistic about the company’s financial performance for the quarter, especially given a strong expected rise in profitability. Let’s take a closer look at what’s expected and what investors should watch for.

Strong Bottom Line Growth Expected in Q4 FY24

According to a brokerage poll, Vedanta’s consolidated net profit is estimated to jump 78% year-on-year (YoY) to ₹4,056 crore for the quarter ending March 2024. This sharp rise is on the back of strong operational performance in the Zinc India and Aluminium divisions, despite some segmental challenges.

Revenue is expected to grow 9.5% YoY, driven largely by higher volumes in the core businesses. On the operational front, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) is projected to grow 23% YoY, with a 300 basis point margin expansion to around 28%.

However, sequentially, margins may narrow due to increased alumina costs, which are expected to impact the Aluminium EBITDA. Additionally, commodity price fluctuations and weakness in the Power segment are likely to weigh on overall performance.

Zinc India and Aluminium Volumes to Drive Earnings

One of the bright spots in Vedanta’s upcoming results is expected to be its Zinc India and Aluminium divisions, both of which have shown volume growth in recent quarters. With Hindustan Zinc, a key subsidiary, having already declared its earnings, the Street has priced in those numbers.

Zinc India contributed significantly to the bottom line in the March quarter, aided by improved realisations and volume growth. Similarly, higher production volumes in Aluminium are likely to support consolidated revenue. But, higher input costs — particularly alumina prices — are expected to partially offset those gains.

Weakness in Oil & Gas and Power Business May Offset Gains

While Vedanta’s core metals business appears to be on solid footing, its Oil and Gas division is expected to underperform. Analysts cite lower production volumes and subdued pricing as the primary reasons for the expected drag on profitability from this vertical.

The Power business, another important contributor, is also under pressure due to lower generation levels, which may further impact operational earnings. Analysts suggest these two segments will be critical to watch, as any major surprises here could tilt the results meaningfully.

Demerger Timeline, Capital Allocation and Debt Reduction in Focus

Beyond financials, management commentary will be the biggest driver of post-results sentiment. Several strategic initiatives and structural concerns are on investors’ radar:

• Demerger Status: Vedanta had initially planned to complete the demerger of its business units by March 2025, but this has now been pushed to September 2025. Any update on this timeline will be crucial.

• Capital Allocation Plans: The market will be closely watching the company’s capital allocation strategy, especially considering its complex holding structure and group-level debt.

• Promoter-Level Debt: Group Chairman Anil Agarwal has been vocal about reducing over $3.5 billion in promoter-level debt. Investors are eager for a detailed update on the progress, sources of funding, and any asset monetisation planned to meet this target.

Vedanta’s Recent Stock Performance

Shares of Vedanta are trading with 1% gains at ₹420.2 on results day. However, the stock has underperformed in recent weeks, declining 8.2% in the past month ahead of earnings. The correction comes amid broader weakness in global commodity prices and renewed concerns over the group’s debt structure and corporate governance.

Despite the near-term pressure, a strong Q4 performance and positive management commentary could help the stock regain investor confidence. On the flip side, any disappointment on debt reduction, segmental weakness, or lack of clarity on the demerger may trigger further selling.

What Analysts Are Watching Closely

• EBITDA performance across Aluminium, Oil & Gas, and Zinc

• Volume and realisation trends across business segments

• Promoter debt repayment roadmap

• Timeline and structure of the demerger

• Dividend policy and shareholder returns

Conclusion: A Crucial Quarter for Vedanta’s Strategic Repositioning

Vedanta’s Q4 results will not only be a test of its financial strength but also a litmus test for investor confidence in the management’s ability to execute on its long-term strategic roadmap. With expectations running high for a robust profit jump and a strong showing in its core business, the spotlight will be equally — if not more — on corporate announcements around debt, demerger, and capital allocation.

If the management delivers a clear and convincing message on these fronts, Vedanta could potentially see a strong re-rating in the weeks to come. However, the risks from commodity volatility, operational underperformance, and execution delays remain elevated.

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