#Vedanta #JPMorgan #HindustanZinc #MetalStocks #CommodityBoom #IndianMarkets #InvestSmart #DebtReduction #FinancialNews #CorporateGovernance
Chandigarh – Global investment bank JP Morgan has reiterated its ‘overweight’ stance on Vedanta Ltd, dismissing concerns around governance and financial practices raised by external entities. The firm highlighted robust cash flows, strong commodity prices, and continued deleveraging efforts as core drivers supporting its positive view.
The latest assessment comes at a time when Vedanta Resources, the parent of Vedanta Ltd, faces renewed scrutiny after short-seller Viceroy Research raised serious allegations related to financial engineering and inter-company dividend flows. However, JP Morgan appears unfazed, maintaining a focus on the company’s fundamentals, earnings profile, and potential upside from asset monetisation and equity infusion.
Vedanta’s Core Fundamentals Stay Intact
In its report, JP Morgan clarified that it evaluates Vedanta Ltd’s (VDL) credit profile by isolating the impact of Hindustan Zinc Ltd (HZL), where the company holds a majority stake. The firm stated:
“We have generally focused on Vedanta Ltd’s cash flows and earnings excluding Hindustan Zinc to unravel the key drivers of the credit. VDL (ex-HZL) reported EBITDA of $3.1 billion in FY25 and a net leverage of 2.2x. We struggle to see financial stress at VDL with these metrics.”
For Hindustan Zinc, the report noted a net leverage of only 0.1x, with expectations of this going up to 0.5x owing to its capital expenditure plans — still considered healthy by industry standards.
JP Morgan emphasized that Vedanta continues to perform strongly in terms of EBITDA generation, with an estimated $5 billion annualized run-rate, placing it among the cheapest investment picks in the Asia-Pacific and EM metals & mining space. The company’s attractive yield profile (8–10%) and improving access to funding—illustrated by $1 billion in bank loans raised by Vedanta Resources in FY26—also contribute to its positive outlook.
Responding to Allegations from Viceroy Research
Earlier this week, US-based short-seller Viceroy Research alleged that Vedanta Resources has been “systematically draining” capital from its listed Indian entities, primarily through large dividend payouts. The report alleged that these practices compromise minority shareholders and long-term sustainability.
Vedanta Group dismissed the claims as “selective misinformation and baseless allegations,” asserting that they were aimed at discrediting the group amid a broader deleveraging and corporate restructuring effort.
JP Morgan chose to sidestep the controversy, stating it remains anchored on operational and financial metrics, rather than speculative or reputational risks raised by third parties.
Governance Oversight and Government Involvement in HZL
In relation to HZL governance, JP Morgan’s report underscored that the Government of India (GoI) still exercises active oversight over key decisions. It highlighted that the government retains three board seats at HZL, which it has consistently occupied since its divestment of majority control in the early 2000s.
“There have been instances where government-nominated directors have acted to prevent transactions not aligned with HZL’s or stakeholders’ interests,” the note stated.
Currently, the Government of India owns 27.92% stake in HZL, while Vedanta Ltd holds 61.84%, leaving the public float at around 10%.
Litigation and Reporting of Contingent Liabilities
JP Morgan also addressed claims that HZL failed to report litigation-related tax claims as liabilities, as suggested by Viceroy. It clarified that in heavily regulated sectors like mining, such litigation is common and doesn’t always qualify as an immediate liability unless adjudicated or legally enforceable.
“HZL has reported tax and other claims of ~₹151.5 billion under litigation. These are not recognized as liabilities — a treatment consistent with peers such as JSW Steel, which has disclosed ₹150 billion of such claims,” the note stated.
Smelter Project and Option Clause
Viceroy also raised concerns about a potential call/put option breach related to a smelter project originally planned for 2007. However, JP Morgan dismissed the significance of this risk, noting:
“The project was eventually completed at a different location after informing the government. We would be surprised if any breach had gone unnoticed by the government for nearly 20 years.”
Risks to Monitor: Commodities and Corporate Strategy
JP Morgan flagged a few downside risks to its thesis, including:
-
Weaker-than-expected commodity prices
-
Aggressive M&A or capex plans exceeding $500 million to $1 billion
-
Tight domestic banking liquidity leading to higher interest costs
-
Regulatory investigations or enforcement actions
Despite these risks, the brokerage believes Vedanta remains fundamentally undervalued, with strong support from its cash-generating assets and planned deleveraging roadmap.
Investor Takeaway
With commodity prices remaining elevated, especially in aluminium, zinc, and oil & gas, Vedanta’s diversified portfolio offers insulation from sector-specific volatility. Continued deleveraging, strategic asset monetization, and governance scrutiny appear to be working in tandem, rather than against, investor interests — at least for now.
As institutional investors parse through noise and narrative, JP Morgan’s reaffirmation adds weight to Vedanta’s investment case in the current global commodities cycle.
#Hashtags
#Vedanta #JPMorgan #HindustanZinc #MetalStocks #CommodityBoom #IndianMarkets #InvestSmart #DebtReduction #FinancialNews #CorporateGovernance #DividendPolicy #ShortSellerAllegations #EmergingMarkets #StockMarketIndia #MinesAndMetals #EquityResearch #HindustanZincLimited #ESG #MarketUpdate
