Vedanta Aluminium Metal: A Strong Long-Term Opportunity?

The Vedanta demerger is now done and dusted but investors are still grappling with one key question – which of the newly listed companies offer the strongest long-term opportunity? Among the four businesses that started trading independently this week, Vedanta Aluminium Metal has emerged as the stock attracting the most attention from brokerages. Following the listing, both Kotak Institutional Equities and Citi have initiated coverage with a ‘Buy’ recommendation. The brokerages in their report noted that the company could benefit from a combination of rising aluminium demand, improving profitability and lower debt. Let’s take a look at what the brokerage houses are saying about this Vedanta Group stock and the rationale behind it – Kotak values the company at seven times Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortisation (EV/EBITDA) based on its March 2028 estimates, while Citi uses six times EV/EBITDA based on September 2027 estimates. According to the brokerage reports, Vedanta Aluminium is not just another metal company. It is India’s largest aluminium producer and among the largest producers outside China. Kotak Institutional Equities believes the company is entering a phase where growth and cost efficiencies could work together. The brokerage said, “Vedanta Aluminium, a pure-play aluminium producer, is well positioned with sector-leading volume growth, accelerating backward integration and a supportive industry backdrop.” The brokerage expects capacity additions to help the company deliver steady production growth over the next few years. At the same time, new bauxite and coal mines are expected to reduce dependence on external suppliers, helping bring down costs. One of the biggest themes highlighted by analysts is backward integration. As per the Kotak report, Vedanta Aluminium’s planned bauxite and coal mine projects could significantly reduce raw material costs. The brokerage estimates costs could decline by around US$150 per tonne over the next few years. Kotak noted, “This backward integration should elevate Vedanta Aluminium to the first decile of the global cost curve and de-risk the business model with reduced cost volatility.” Another factor driving the bullish views is the outlook for aluminium prices. The brokerage house noted that the global aluminium market is expected to remain in deficit as demand continues to outpace supply. Demand is being supported by electric vehicles, renewable energy projects, power grid expansion and data centres. Kotak said, “We expect the global aluminium market to remain in deficit over CY2026-29, and prices to remain elevated.” Citi has an even more constructive view on the metal. The brokerage stated, “The aluminium market is in deficit and will draw inventories sharply over the next 3-6 months, driving prices up 15-20% to $4,000/t in our base case.” If aluminium prices remain strong, earnings for producers like Vedanta Aluminium could receive an additional boost. Citi has started coverage on the stock with a target price of Rs 560 per share. The brokerage house report added that the investment case rests on four pillars: a positive aluminium outlook, production growth, cost improvements and a stronger balance sheet. The brokerage said, “We initiate Vedanta Aluminium with a Buy and a target price of Rs 560.” It also expects leverage to improve significantly over the next two years, adding that the company could move into a net cash position by financial year 2028. While both brokerages see long-term potential, the investment case remains closely linked to aluminium prices, execution of mining projects and future capacity expansion. Kotak highlighted that “Strong FCF (Free Cash Flow) should drive rapid deleveraging and higher shareholder returns.” The brokerage further said, “The peak capex is behind us, and we expect strong FCF to accelerate deleveraging and company to become net debt free in FY2028.”