Vedanta shares drop 4% as Q2 profit halves; fall 38% in 6 months

Shares of Vedanta were reeling under selling pressure in Monday’s trade even as the overall market witnessed a strong session. The share price of billionaire Anil Agarwal-led mining company dropped nearly 4% in intraday trade after it reported weak earnings for the quarter ended September 2022 due to fall in commodity prices and a rise in operating expenses. The other major metal stocks were also under stress, with big names like Tata Steel and Steel Authority of India (SAIL) falling up to 1%.

Vedanta shares declined as much as 3.7% to hit a low of ₹274.30 on the BSE, against the previous close of ₹284.85. The market capitalisation of the mining heavyweight slipped to ₹1.03 lakh crore as 5.67 lakh shares changed hands over the counter on the BSE, against the two-week average volume of 7.19 lakh stock by 2:00 pm. In comparison, the BSE Sensex was trading 637 points higher at 60,597 levels, while the BSE Metal index was top laggard on the sectoral front with a 0.15% loss.

The largecap stock was trading higher than the 20-day, 50-day, and 100-day moving averages but lower than 5-day and 200-day averages. The stock has fallen 21% in the calendar year 2022, while it has dropped 31.5% in the past six months. In the last one year, it has lost 7.5%, while it rose 3.5% in a month. The stock currently trades 38% lower than its 52-week high of ₹440.75 on April 11, 2022, while it touched a 52-week low of ₹206.10 on July 1, 2022.

Vedanta shares were hammered after the Mumbai-headquartered company reported a 60.8% decline in consolidated net profit at ₹1,808 crore for the second quarter ended September 30, 2022 (Q2 FY23), compared with ₹4,615 crore in the year-ago period.

Its consolidated income during the quarter rose 20.2% to ₹37,351 crore from ₹31,074 crore in the same period last year, driven by higher sales volume, strategic hedging gains, and foreign exchange gains.

The company, engaged in mining of iron ore, gold and aluminium, saw its EBITDA declining by 24% YoY to ₹8,038 crore on account of input commodity inflation and lower output commodity prices. The EBITDA margin stood at 25% versus 40% in the September quarter of the last fiscal.

The company's expenses shot up to ₹33,221 crore from ₹23,171 crore in the corresponding period last fiscal. Finance cost jumped 54% YoY to ₹1,642 crore, mainly due to increase in average borrowings which was partly offset by lower average rate of borrowings.

Commenting on Q2 earnings, Sunil Duggal, Chief Executive Officer, said, “Our growth and vertical integration projects, aimed to reduce market volatility impact and create shareholders’ value, are progressing well. We remain well positioned, with a rich diversified asset portfolio, strong balance sheet, and cost optimisation levers, to withstand challenging macroeconomic environment.”

At the end of the September quarter, the mining conglomerate’s consolidated net debt stood at ₹32,144 crore, up 20% on sequential basis. However, gross debt decreased from ₹2,543 crore QoQ to ₹58,597 crore. The cash and cash equivalent stood at ₹26,453 crore as of September 2022.

The company said that its net debt-to-EBITDA ratio stood at 0.7x, which is best among Indian peers.