Vedanta chairman attacks City's valuation

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Brian Gilbertson, the chairman of Vedanta Resources, the Indian mining group that floated six months ago, yesterday hit out at the City for undervaluing his company's shares in spite of its strong performance.

"Since listing, the trajectory of the Vedanta share price has been most disappointing. In my judgement, Vedanta is today a very undervalued share," Mr Gilbertson, the former boss of BHP Billiton, said yesterday.

His frustration came as Vedanta reported a trebling of pre-tax profits for the year of $233.4m (£127.4m) and a 34 per cent rise in turnover to $1.3bn. But since listing in December at 390p a share in the largest flotation of the year, the share price has fallen more than 25 per cent.

Vedanta raised some $825m through the float and since then, the company has increased its production and lowered its costs to take advantage of rising metal prices. Zinc prices were up 16 per cent over the year and the price of aluminium was up 10 per cent. Rising copper prices did, however, have a negative impact on the company, as it imports copper, which it then refines. But copper and zinc production costs were each pared by 14 per cent in the year to the end of March.

Demand for metals within India, which has a GDP growing at 8 per cent a year, is also driving growth at Vedanta. It reported a 9 per cent increase in demand for zinc in India, compared with 3 per cent growth in global zinc demand.

But the shares have been dogged by uncertainty over economic reforms in India that will free up further development opportunities for Vedanta. The surprise recent election result in India, which saw a coalition brought to power, had created fears that these economic reforms may be derailed.

Mr Gilbertson yesterday said there was still some uncertainty around the government's intentions and future opportunities to invest in privatisations, but added there would still be enough demand in India for the company to grow rapidly.

The Indian government introduced tariffs on imported metals in January, which has taken $10m off operating profits. But Mr Gilbertson said the money raised from the flotation will be used to fund a $2bn expansion programme that will also reduce costs and boost production at the group.

Mr Gilbertson's views and predictions did little to convince the market to re-evaluate Vedanta's shares. The shares yesterday fell nearly 3 per cent to 276p, giving it a market capitalisation of £789m.