Why is Vedanta share price down 10% in the last 1 month?

Vedanta share price under pressure

Metals and mining major Vedanta has witnessed some troubled times recently. This has reflected on its share price. Notably, the Vedanta share price is down close to 10% in the last one month and almost 21% in the past year.

So, what is plaguing the Vedanta share price to cause this sharp downturn? Let’s try and decode!

Vedanta share price: Reasons for decline

High promoter pledge: One of the primary concerns for Vedanta has been the promoters’ high pledge of its shares to raise funds. Notably, in 2021, the company pledged shares of 65.18% to raise about $800 million.

Although the mining major repaid $100 million to Standard Chartered Bank, the still high levels of promoters' pledge remains a concern.

Downgrade by Moody’s: Recently, the renowned credit rating agency downgraded Vedanta’s corporate family rating to Caa1 from B3. The agency cited increasing refinancing risks due to debt maturities as the reason for the downgrade. Moreover, the firm maintained a negative outlook for the company.

Moreover, in February, ratings agency S&P Global remarked that Vedanta’s credit rating may worsen if it is unable to raise $2 billion and sell its overseas Zinc assets.

Lack of Government Approval: Vedanta’s plans to buy an additional 6% stake in its subsidiary Hindustan Zinc has hit a roadblock due to the Indian government. The government, which is the largest minority shareholder in Hindustan Zinc with a stake of 29.54%, has cited the fall in wider investor sentiment as a reason to postpone its stake sale.

Weak Results: Another cause for the recent decline in Vedanta share price has been its weak results for the Oct-Dec 2022 period. While net profit witnessed a yearly decline of 42% to Rs 3,092 crores, the company’s operating revenue remained almost unchanged from the previous year at Rs 33,691 crores.

Vedanta share price: Analyst View

Emkay Global: The renowned brokerage has a Buy rating on the stock with a price target of Rs 540. The firm cited Vedant’s comfortable valuation levels and ability to generate free cash flow as the primary reasons to accumulate the stock.

Motilal Oswal: The top domestic brokerage has a Neutral rating on the stock with a price target of Rs 255. The firm has cited a bearish outlook on metal prices and the company’s high debt levels as concerns to future share price appreciation.

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.