NEW DELHI: Metals-to-oils conglomerate Vedanta Ltd on Friday announced the demerger of its commodities businesses into five separate companies to unlock value and attract investment. The company plans to list all the five demerged entities on the bourses. The six firms after the demerger will be -- Vedanta Aluminium, Vedanta Oil and Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Limited. Currently, only Vedanata Ltd and Hindustan Zinc Ltd are listed firms.
After the demerger, the semiconductor business and HZL will be housed under Vedanta Ltd, Balco will be housed under Vedanta Aluminium. Cairn Energy will be under Vedanta Oil and Gas. The company said the move will provide opportunities to global investors, including sovereign wealth funds, retail investors and strategic investors, with direct investment opportunities in dedicated companies.
“By demerging our business units, we believe that 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,” said Anil Agarwal, Chairman of Vedanta Limited.
It said the de-merger is planned to be a simple vertical split, for every one share of Vedanta Limited, shareholders will receive one share of each of the five newly listed firms. Vedanta is into diverse businesses that include metals and minerals, oil and gas and power. Now the company has plans to foray into manufacturing semiconductors and display glass. Vedanta is of the view that once demerged, each independent entity will have greater freedom to grow to its potential and true value via independent management, capital allocation and niche strategies for growth.
Vedanta Ltd has been battling high debt with its parent company – Vedanta Resources Ltd – facing $3.6 billion debt repayments in the next two years. As of March 2023, Vedanta’s debt/EBITDA stood at 3.7 times. Moreover, rating agencies Moody’s InvestorsService and S&P recently downgraded Vedanta Resources to speculative grade, meaning the company needs favourable business conditions to be able to make repayment of debts. In August 2023, Vedanta Resources sold a 4.3% stake in key subsidiary Vedanta Limited for around $500 million to stave off some of the pressure arising from the holdco’s imminent cash needs.
Reshaping Future
Six demerged entities of Vedanta Group and the businesses to be housed under them
Vedanta Limited
Vedanta Aluminium
Vedanta Oil & Gas
Vedanta Base Metals
Vedanta Steel and Ferrous Materials