Vedanta shares give up initial gains amid volatile trade; how the Street is reading company's dividend

Vedanta shares gave up initial gains amid choppy trade on Monday after the metal giant reported a muted set of earnings for the quarter ended December 2022. The Vedanta stock declined as much as 1.1 per cent to Rs 316.4 apiece on BSE in late morning deals, having risen to as high as Rs 324.9 apiece earlier in the day.

After market hours on Friday, the company reported a 40.8 per cent year-on-year fall in net profit to Rs 2,464 crore for the October-December period thanks to higher input costs and the impact of windfall tax. The company's income grew 0.4 per cent to Rs 34,818 crore, according to a regulatory filing.

The company's board approved an interim dividend of Rs 12.5 per equity share for the year ending March 2023 — the fourth dividend payout of the financial year, amounting to Rs 4,647 crore.

Also Read: Q3 Results 2023: Vedanta net drops 41% - HIGHLIGHTS

What brokerages say on Vedanta shares, Vedanta dividend announcement

According to Kotak Institutional Equities, the high debt of Vedanta's parent (Vedanta Resources) is a key overhang for the stock, through the dividends are encouraging. The brokerage maintained a 'sell' rating on the Vedanta stock and raised its target price by Rs 20 to Rs 240.   

Kotak Institutional Equities cut its EBITDA estimate for the company for the year ending March 2023 by four per cent factoring the company's performance in the January-December 2022 period. It, however, raised its estimates for the two years ending March 2025 considering the company's earnings from its aluminum and oil divisions.

Recently, Vedanta also announced the sale of Zinc International assets to Hindustan Zinc for a cash consideration of $2,981 million

Also Read: Vedanta dividend 2023 announced: Check amount, record date and payment date

According to Kotak, the divestment of Zinc International assets will help Vedanta deleverage its parent’s overall debt.

Citi continued with a 'neutral' call with a target price of Rs 335 per share. According to Citi, Vedanta's dividend outflow for the financial year 2022-23 so far would amount to $3.7 billion and leverage concerns appear to be abating.

CLSA maintained a 'reduce' rating on Vedanta with a target price of Rs 290. 

At 11 am, Vedanta shares were trading 0.7 per cent lower at Rs 317.6 apiece on BSE, underperforming the benchmark Sensex index, which was up 0.1 per cent amid volatility. 

Vedanta shares have gained nearly one-fourth of their value in the past six months, a period in which the Sensex has risen 1.8 per cent.