New Delhi, September 30, 2023 – Vedanta Ltd, the multi-faceted metals-to-oils conglomerate, has unveiled a significant corporate restructuring strategy, announcing the demerger of its commodities businesses into five separate entities. This strategic move aims to unlock substantial value and attract investment, with plans to list all five newly demerged companies on the stock exchanges. Currently, only Vedanta Ltd and Hindustan Zinc Ltd are listed firms within the group.
The six firms resulting from this demerger are:
- Vedanta Aluminium: This entity will encompass Balco as well, holding a 51% stake in the company.
- Vedanta Oil and Gas: Home to Cairn Energy, this company opens investment opportunities in the oil and gas sector.
- Vedanta Base Metals: Focused on downstream copper business and Zinc International.
- Vedanta Steel and Ferrous Materials: Including Iron Ore Business (IOB), Western Cluster Limited (WCL), and ESL Steel Limited.
- Vedanta Power: Incorporating all Vedanta Limited IPPs, including Athena and Meenakshi.
- Vedanta Limited: Housing the semiconductor business and Hindustan Zinc Ltd.
This restructuring paves the way for global investors, including sovereign wealth funds, retail investors, and strategic investors, to explore direct investment opportunities in these dedicated companies.
Chairman of Vedanta Limited, Anil Agarwal, expressed, “By demerging our business units, we believe that we will unlock value and potential for faster growth in each vertical. While they all come under the larger umbrella of natural resources, each has their own market, demand and supply trends, and potential to deploy technology to raise productivity.”
This demerger, designed as a straightforward vertical split, will entitle shareholders to receive one share of each of the five newly listed firms for every one share of Vedanta Limited they hold. Vedanta, known for its diverse businesses spanning metals and minerals, oil and gas, and power, is now set to expand into the manufacturing of semiconductors and display glass. The company believes that the demerger will grant each independent entity the autonomy to realize its full potential and value through independent management, capital allocation, and niche growth strategies.
Vedanta Ltd has been grappling with high debt, and its parent company, Vedanta Resources Ltd, faces $3.6 billion in debt repayments over the next two years. As of March 2023, Vedanta’s debt/EBITDA ratio stood at 3.7 times. The recent downgrades of Vedanta Resources to speculative grade by rating agencies Moody’s Investors Service and S&P underscore the need for favorable business conditions to meet debt obligations. To alleviate some of this financial pressure, Vedanta Resources sold a 4.3% stake in key subsidiary Vedanta Limited for approximately $500 million in August 2023.
This restructuring marks a significant step for Vedanta Group as it reshapes its future, offering distinct investment avenues in various sectors within the natural resources domain.
