Why Vedanta shares are rising today: CLSA highlights major benefit from government policy change

Vedanta Share Price: Shares of Vedanta Limited rallied as much as 4 per cent on Wednesday, touching an intraday high of Rs 310 on the BSE, after the Centre reduced royalty rates on crude oil and natural gas production from several categories of fields, including deepwater and ultra-deepwater blocks.

The revised royalty structure was notified by the Ministry of Petroleum and Natural Gas on May 8 as part of efforts to encourage domestic exploration and production activity.

Why Vedanta stands to benefit

According to brokerage CLSA, the government has fixed the standard deduction at 15 per cent for all blocks other than nomination blocks. The brokerage noted that this change is likely to reduce royalty rates for Vedanta’s Rajasthan oil fields from 16.67 per cent to 10.6 per cent.

The reduction is expected to lower the royalty burden on the company’s upstream business and improve profitability from oil and gas production operations.

CLSA also said the revised framework could reduce royalty payouts across multiple producing fields in India, supporting higher upstream investments and fresh exploration activity.

Government signals support for upstream sector

The brokerage highlighted that the royalty reduction sends a broader policy signal at a time when crude oil prices remain elevated and fiscal pressures are high.

According to CLSA, the move suggests the government is prioritising higher domestic production and exploration activity instead of imposing additional taxes on upstream producers.

The government has also reduced royalty rates further for blocks awarded after 2019 under the Hydrocarbon Exploration Licensing Policy (HELP), aimed at encouraging fresh investments into India’s oil and gas sector.

Focus shifts to Vedanta demerger

Investor attention also remains on Vedanta Limited’s ongoing demerger process, one of the biggest restructuring exercises in India’s metals and mining sector.

Following the demerger, Vedanta’s share price now excludes the value of four newly carved-out entities, with investors awaiting their separate listings on the BSE and NSE.

Under the restructuring plan, eligible shareholders will receive one share each of Vedanta Aluminium Metal (VAML), Talwandi Sabo Power Limited, Malco Energy Limited and Vedanta Iron and Steel Limited for every one share held in Vedanta.

Listing process expected by mid-June

During an investor call following quarterly earnings earlier this month, Vedanta Resources CEO Deshnee Naidoo said the company is preparing to file for listing approvals of the demerged entities.

“In the next week, we will be filing with the exchanges for listing approval. The shares of the resulting companies are expected to list and commence trading by mid-June,” she said.

The demerger is aimed at creating separate sector-focused businesses spanning aluminium, oil and gas, power, and iron and steel, while the residual Vedanta entity will continue to house its base metals operations.