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Strong Domestic Demand Fuels Revenue Growth

Vedanta Ltd, a subsidiary of Vedanta Resources Ltd, operates across multiple sectors including oil and gas, zinc, lead, silver, copper, iron ore, steel, aluminium, and power, with a presence in India and globally.

• Revenue from operations rose 6.2% YoY to ?37,434 cr in Q1FY26, driven by strong market premiums and forex gains, partially offset by lower commodity prices.

• Aluminium revenue increased 7.7% YoY to ?14,556 cr, supported by a 17% YoY rise in domestic sales to 313 KT. Total production grew 1.5% YoY to 605 KT.

• Zinc and lead revenue (India business) declined 4.8% YoY to ?6,116 cr, despite achieving the highest-ever quarterly mined metal production of 265 KT.

• Zinc international business revenue surged 52.7% YoY to ?1,150 cr, driven by a 74% YoY increase in Gamsberg’s production, supported by improved ore availability and mining ramp-up.

• EBITDA fell 0.3% YoY to ?9,918 cr in Q1FY26, mainly due to a 20% YoY rise in material costs. Consequently, EBITDA margin contracted by 170 bps YoY to 26.5%.

• Reported PAT declined 12.5% YoY to ?4,457 cr, primarily due to a sharp increase in tax expenses (up 92.1% YoY).

Outlook & Valuation

Vedanta’s financial performance was moderate in Q1FY26, characterised by commodity price volatility and changing global trade dynamics. Despite the macro headwinds, domestic demand was strong, helping support market premiums. Margins were strong across key businesses, driven by operational excellence and cost discipline. The company's commitment to deleveraging and improving its capital efficiency, along with a robust business model, strong governance framework and transparent disclosures, positions Vedanta well to address challenges and capitalise on opportunities in the industry. Hence, we upgrade our rating on the stock to BUY with a revised target price of Rs. 485, based on 4.6x FY27E EV/EBITDA.

Key concall highlights

• The Board of Hindustan Zinc, a Vedanta subsidiary, has approved Phase 1 of an expansion plan to add 250 KT of capacity, backed by a $1.4 billion investment, as part of a broader strategy to reach 2 million metric tons of capacity.

• Vedanta’s power business is set to add 1,300 Megawatts (MW) of new capacity in Q2FY26. In July, 350 MW at Meenakshi (Unit 3) and 600 MW at Athena (Unit 1) were commissioned. An additional 350 MW at Meenakshi (Unit 4) and 600 MW at Athena (Unit 2) are scheduled for commissioning in August and Q4FY26, respectively.

• The company’s zinc and aluminium production has a strong domestic presence, with 75% of zinc and 65% of aluminium sold within India. International exposure remains limited, with only 3% of aluminium exports going to the US market.

• In alumina production, the company aims to exceed 3 million metric tons in FY26, having achieved 587,000 tons in Q1, demonstrating solid progress towards this goal.

• The Gamsberg Phase-2 project is 80% complete, with mechanical completion targeted for December. The expansion is expected to add 4 million tons of run-of-mine ore and nearly 200,000 tons of zinc in annually.

• For its oil and gas segment, the company has provided guidance of 95,000 to 100,000 barrels of oil equivalent per day for FY26.

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