Vedanta Ltd, a metals-to-oil conglomerate owned by billionaire Anil Agarwal, has announced a major restructuring plan that will see it demerge its diversified businesses into six separate listed companies. The move is aimed at unlocking value for shareholders and easing the debt pressure on its UK-based parent, Vedanta Resources Ltd.
The six new entities will focus on aluminum, oil and gas, iron ore and steel, copper and zinc, semiconductors, and power generation and transmission. Vedanta Resources will remain the holding company, with majority stakes in each of the new companies. The demerger process is expected to take 12 to 15 months, subject to approvals from the board, stock exchanges and the National Company Law Tribunal (NCLT).
The restructuring plan comes after Vedanta’s failed attempt to take the entire company private last year, which was rejected by investors as too low. Vedanta also faced opposition from the Indian government, which is a minority shareholder in Hindustan Zinc Ltd, one of Vedanta’s key cash-generating units. Vedanta had proposed to sell some of its zinc assets to Hindustan Zinc to reduce its debt, but the government did not agree.
Vedanta’s debt woes have been exacerbated by the global rise in borrowing costs and the impact of the COVID-19 pandemic on its operations. According to the company, Vedanta Resources had a total debt of $9 billion as of May, of which $4.2 billion is due by 2025. Vedanta has also pledged almost all of its majority holdings in Vedanta Ltd and Hindustan Zinc to secure its debt, limiting its ability to raise funds or sell assets.
Analysts have expressed mixed views on Vedanta’s demerger plan, saying that it may not immediately solve the debt problem of the parent company, and that it may face challenges in implementing the transition and attracting investors for the new entities. Some analysts have also suggested that Vedanta may sell some of its non-core businesses after the demerger to raise cash and focus on its growth areas.
However, Vedanta has said that the demerger will simplify its corporate structure, enhance its operational efficiency, and create value for its shareholders. The company has also said that the demerger will enable each of the new entities to pursue their own strategies, raise capital independently, and attract sector-specific investors. Vedanta has also assured that the demerger will not affect its existing employees, customers, suppliers, and other stakeholders.
Vedanta’s demerger plan is a bold and ambitious move that could transform its business landscape and pave the way for a more sustainable and profitable future.
Source: Mining Weekly
