Wealth Destruction? Why Vedanta Stock Is Down 65% Today

The stock of mining major Vedanta Limited reported a decline of over 64 percent from its previous closing price.

While the stock ended Wednesday’s session at Rs 775, it is now trading at around Rs 275 apiece, a decline of Rs 400 in just one day.

However, investors need not worry about the losses they will have to bear, as the sharp slump in the stock was more technical than reflective of the actual worth of the company.

As Vedanta is going ahead with its restructuring plans, the company will demerge its aluminium, power, oil & gas, and steel businesses into separate listed entities.

The demerger will divide the existing shareholders’ investment into the new separate entities.

Shareholders holding the stock as of the record date will receive one share each in the four new companies for every Vedanta share held.

To discover the valuation of the demerged entities, the National Stock Exchange conducted a special pre-open session between 9:15 am and 9:45 am on Thursday.

The special session was conducted today, while the record date is May 1, as it is a holiday on account of Maharashtra Day.

Hence, the share price of Rs 275 of Vedanta reflects the market valuation of the company’s mining business only.

However, the stock is down by 5 percent on Thursday compared to the discovered price.

After the special trading session, the opening price of the stock was Rs 289.50. However, the stock declined to Rs 275 during normal trading hours.

According to experts, the decline in the stock was a result of the overall negative sentiment in the market due to stalled progress on the war front in the Middle East.

In the long run, experts say the demerger of Vedanta will help investors better value the businesses of the conglomerate while also leading to operational transparency.