Vedanta Aluminium capacity expansion and captive mines drive earnings growth outlook

Investment View and Core Thesis

In its July 23, 2026 Conviction Pick report, ICICI Securities has a positive view on Vedanta Aluminium Metal (VAML) and maintains a BUY recommendation with a target price of Rs 600, compared with the CMP of Rs 430. The broker’s thesis is supported by VAML’s domestic aluminium-market leadership, capacity-led volume growth, greater raw-material security, a richer value-added product mix and capital-efficient operations.

VAML, part of the Vedanta group, operates India’s largest primary aluminium capacity of about 2.9 MTPA and held more than 40 per cent of the domestic primary aluminium market in FY26. Its assets include 1.85 MTPA of smelting capacity at Jharsuguda, Odisha, 1 MTPA at BALCO, Chhattisgarh, and 5 MTPA of alumina-refining capacity at Lanjigarh, Odisha.

Domestic Demand and Capacity Expansion

ICICI Securities expects structural domestic demand to support VAML’s growth case. Industry estimates cited in the report indicate that aluminium demand could rise from 5.6 MTPA in 2025 to 8.0 MTPA by 2030, driven by infrastructure, electric vehicles, renewable-energy and transmission investment, and consumer durables.

A newly commissioned 435 KTPA BALCO smelter lifted VAML’s smelting capacity to about 2.9 MTPA in FY26. Debottlenecking at Jharsuguda is expected to take capacity to about 3.0 MTPA by FY28E. VAML has also outlined a potential 3 MTPA greenfield smelter beyond the current expansion cycle.

The company aims to raise the share of value-added products from about 71 per cent in FY26 to about 90 per cent by FY28E. The broker expects this richer product mix to improve product premiums and realisations.

Backward Integration and Cost Competitiveness

Backward integration is central to the broker’s margin thesis. Commissioning of the Lanjigarh Train-II refinery lifted alumina-refining capacity to about 5 MTPA in FY26 and reduced external sourcing. VAML is evaluating an expansion to 6 MTPA to achieve full alumina self-sufficiency.

The report expects the 9 MTPA Sijimali bauxite mine to commence in FY27 and expand to 12 MTPA by FY28E. Kuraloi, Ghogharpalli and Radhikapur coal mines, with capacities of 8 MTPA, 20 MTPA and 6 MTPA respectively, are expected to be commissioned from FY27E onwards.

ICICI Securities estimates that these initiatives can reduce cost of production from US dollars 1,758 per tonne in FY26 to US dollars 1,656 per tonne in FY28E. Assuming LME aluminium of US dollars 3,100 per tonne, the broker expects EBITDA per tonne of about US dollars 1,620 in FY28E.

Financial Performance and Forecasts

Reported FY26 total operating income was Rs 66,891 crore, up 12.8 per cent year on year. EBITDA rose 44.3 per cent to Rs 25,142 crore, with EBITDA margin expanding to 37.6 per cent from 29.4 per cent in FY25. PAT increased 69.1 per cent to Rs 11,844 crore, while EPS was Rs 30.3.

ICICI Securities forecasts FY26-FY28E revenue CAGR of 16.3 per cent, volume CAGR of about 8 per cent, EBITDA CAGR of 31.1 per cent and PAT CAGR of 42.7 per cent.

Cash Flow, Deleveraging and Valuation

The broker expects operating cash flow of about Rs 30,000 crore annually from FY27 onwards, aiding deleveraging despite dividends. Net debt to EBITDA is projected to improve from 1.3 times in FY26 to 0.2 times in FY28E, while FY28E net debt is estimated at Rs 9,795 crore.

ICICI Securities values VAML at a target price of Rs 600 using a sum-of-the-parts approach based on 7 times FY28E EV/EBITDA for VAML standalone and BALCO. The BALCO valuation reflects VAML’s 51 per cent stake and includes a 20 per cent holding-company discount.

The broker views the stock’s approximately 4 times FY28E EV/EBITDA valuation as not fully reflecting the company’s earnings growth, cost competitiveness and cash-generation potential.

Key Risks

• Volatility in LME aluminium prices.
• Higher coal, coke and pitch costs.
• Increased global supply if China’s primary-aluminium cap is relaxed or new smelters are commissioned.
• Delayed ramp-up of the BALCO expansion.
• Delays in mine approvals or development.
• A failure by Vedanta Resources to meet parent-level debt obligations, or adverse capital allocation, could affect VAML’s growth capital expenditure, balance sheet and dividends.