NEW DELHI: Amid the controversy around the last-moment shift of its new semiconductor plant to Gujarat, what got lost in the commotion afterwards is the story of Vedanta’s diversification plans.
Vedanta Group, which is primarily into mining sector, says this will be its first foray into a different sector.
Vedanta Ltd, a subsidiary of London-based Vedanta Resources, is one of the world’s leading Oil and Gas and Metals companies with significant operations in Oil & Gas, Zinc, Lead, Silver, Copper, Iron Ore, Steel, and Aluminium and Power across India, South Africa and Namibia.
With this move, the conglomerate is on a way to diversify its portfolio from oil to metal into another strategically important sector – semiconductors.
Semiconductor foray
The mining giant, along with Taiwanese chip maker Foxconn, plans to invest Rs 1.54 lakh crore to set up the semiconductor ecosystem in Gujarat.
According to the company, the proposed semiconductor manufacturing fab unit will operate on the 28nm technology nodes and the display manufacturing unit will produce Generation 8 displays catering to small, medium and large applications.
Vedanta will hold 60% of the equity in the joint venture while Foxconn will own 40%.
The group said the project will see the light of day in next two years, and it is expected to generate one lakh employment for the country. The new business, however, will be housed in Volcan Investments Limited, the holding company owned by Anil Agarwal’s family trust.
“India’s own Silicon Valley is a step closer now. India will fulfil the digital needs of not just her people, but also those from across the seas. The journey from being a Chip Taker to a Chip Maker has officially begun,” Anil Agarwal said in a statement after making the announcement.
And while Agarwal’s statement was full of patriotic fervour, he did not in as many words explain what made the company take a big leap into the semiconductors business.
While investors gave a thumbs-up to the announcement with the stock of Vedanta Ltd rising by as much as 13% after the announcement, analysts and experts believe this can be a good move for the company as the Indian semiconductor market was valued at $27.2 billion in 2021 and is expected to grow at a healthy CAGR of nearly 19% to reach $64 billion in 2026.
Sunil Duggal, the chief executive officer of the company in an analysts’ call in July end had tried to explain the company’s interest in the Semiconductor business.
“The government of India has made a policy that how they can support this (semiconductor) sector where this is also a very strategic sector for the country and the government is quite inclined to make this work in the country. That is why they have declared the new policy and even the state government, each of the state governments was quite excited about this,” he had said answering an analyst’s question.
The government has announced Rs 76,000 crore production-linked incentive (PLI) scheme for semiconductors.
Under the production-linked incentive (PLI) scheme, semiconductor units will be offered financial support as well as an incentive of 4-6% on net sales for 5 years (maximum of Rs 30 crores per application).
The company also announced that it would manufacture iPhones, TV equipment, and electric vehicles in Maharashtra.
“The company will make Maharashtra a manufacturing hub of iPhones, other television equipment and Electric Vehicles,” said Anil Agarwal after the furore over the company’s last moment plan to shift the semiconductor plant from Maharashtra to Gujarat.
From mining to electronic manufacturing
The mining or metal sector, Vedanta, is trying into other sectors to diversify its portfolio into electronic manufacturing and semiconductor.
“We are looking at building capacities across businesses with planned new investments. For FY23, we have planned around $ 2 billion capex investment in zinc, oil and gas and aluminium. I am excited about our acquisition of Nicomet which makes us the sole producer of Nickel in India, a metal which is in high demand for electric vehicles and batteries,” said Agarwal in its AGM speech.
Financially, the last year has been a good year for the mining giant. It clocked a record revenue of Rs 131,192 crore and EBIDTA of Rs 45,319 crore, which was up 66% Year-on-Year and contributed more than Rs 54,000 crore to the government exchequer.
In fact, the company delivered strong performance across its business verticals.
Its aluminium business recorded the highest-ever annual production. Its debt fell by Rs 3435 crore. As per its annual financial result, the company has a strong liquidity position with cash and cash equivalents of Rs 32,130 crore (FY 2021: Rs 32514 crore).