Decoding Vedanta Coal Auction


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Vedanta stock has taken a beating because they supposedly paid 21% revenue share for Radhikapur West, whereas Hindalco managed to win Chakla for just 14.25%.

But the market has obviously not bothered to understand the difference between these blocks.

Radhikapur is far larger block, with over 125MT of extractable capacity, and most importantly, with minimal forest cover and close to ports for easy shipping.

Hindalco paid just 14.25%, but their extractable capacity is lower, with significant forest cover, and much further from ports.

These aspects more than compensate for the 6.25% extra revenue share that Vedanta is paying. In fact, Vedanta is paying far less than the 30% that some other bidders have committed to pay for their blocks.

I see this as a major long term positive for Vedanta - where they don’t increase their debt, but increase their revenue significantly. The earlier model of acquiring assets was far dicier - because it created large balance sheet pressure on the company.
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