In a whirlwind of market volatility, Vedanta's shares took a sharp downturn, plunging 9% to trade near their one-year low level. The value of the company's stock dropped by 8.96%, reaching its lowest point of the day at Rs 247.80, which worried investors. At this level, it's a mere 0.79% away from its 52-week low of Rs 245.85, last seen on August 4, 2022. Furthermore, it has dropped a significant 27.28% from its one-year high of Rs 340.75 reached on January 20, 2023.
The sudden drop in Vedanta's stock price happened because of the news that Twin Star Holdings, a big shareholder of Vedanta, wants to sell 4.30% of its ownership in the company. The funds raised by selling this part of the company will be used to pay off the debts that Vedanta Resources owes. Each share under the sale is being offered at Rs 258.50 apiece. However, the company has not yet made an official statement about selling potential stake.
The trading frenzy continued on BSE, where a staggering 1.68 crore shares changed hands, far exceeding the two-week average volume of 5.57 lakh shares. The counter turnover stood at Rs 431.19 crore, indicating a market capitalization (m-cap) of Rs 94,063.66 crore. Today's trading saw a significant number of buy orders, with 9,07,126 buy orders compared to 5,56,851 sell orders.
Adding to the challenging situation, Vedanta reported a 40% decline in consolidated net profit, amounting to Rs 2,640 crore, for the quarter ending June 30, 2023 (Q1 FY24). The significant drop in profit, when compared to Rs 4,421 crore earned in same period last year, is making company's financial situation difficult.
As of June 2023, promoters held 68.11% of Vedanta's shares. In the first quarter of the financial year 2023-24, Vedanta revealed that it owed around Rs 59,200 crore in net debt. In June quarter, EBITDA went up to 1.88 times, which was higher than 1.28 times recorded in previous March quarter.
Even though Vedanta has been dealing with challenges, it has made significant strides in lowering its debt.
Back in February 2022, Vedanta pledged to speed up efforts to reduce its debt by $4 billion within three years. Surprisingly, in just 14 months, the company managed to cut $3 billion of its debt.
Experts in industry have given their views on how the stock is expected to perform from a technical perspective. Kush Ghodasara, CMT, noted that the stock's recent downfall was accompanied by heavy volumes, leading to bearish indicators. He expects the stock to remain weak in the near term, setting a stop loss at Rs 274.
Osho Krishan, Senior Analyst, Technical & Derivative Research at Angel One, highlighted the bearish undertone in the daily charts of Vedanta. He observed a gap down in the stock's value with relatively higher volumes, indicating resistance at the higher gap and breakdown zone of Rs 265-275. On the other hand, he sees support around the swing low of Rs 230.
AR Ramachandran from Tips2trades shared his insights on the stock's daily charts, considering it bearish and signaling strong support at Rs 250. He cautioned that a daily close below this level could lead to a target of Rs 219 in the near term, while resistance will be at Rs 261.
In the broader Indian market, equity benchmarks extended their decline during afternoon trading, with bank, financial, technology, consumer, realty, and energy stocks taking a hit.
Amidst the turbulence, investors & market watchers are keeping a close eye on Vedanta's developments, and eagerly awaiting official statements regarding the stake sale and company's plans to tackle its financial challenges. As the market remains unpredictable, Vedanta's future trajectory will undoubtedly be a focal point for stakeholders in the coming days.