Vedanta unveils demerger plan; to create six listed entities with an aim to unlock value

Vedanta Demerger: Vedanta Limited, led by billionaire Anil Agarwal, has announced a significant move towards value creation by demerging its business units.

Vedanta to demerge business into 6 listed companies

The conglomerate plans to establish six separate listed companies: Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals, and Vedanta Limited.

This decision aims to create independent verticals for metals, power, aluminium, and oil and gas businesses.

Vedanta demerger plan

The demerger is structured as a vertical split, with shareholders receiving 1 additional share of each of the five newly listed companies for every 1 share of Vedanta Limited they hold. The move is anticipated to unlock the potential value of each business unit, allowing for faster growth and independent management strategies.

Anil Agarwal, Chairman of Vedanta, highlighted the rationale behind the decision, stating, “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 its own market, demand and supply trends, and potential to deploy technology to raise productivity.”

The appointed leaders for the new entities include John Slaven for Vedanta Aluminium, Vibhav Agarwal for Vedanta Power, Chris Griffith for Vedanta Base Metals, and Arun Misra for Vedanta Limited.

The conglomerate, known for its diverse portfolio in metals and minerals, oil and gas, traditional ferrous vertical, and power, is also venturing into the manufacturing of semiconductors and display glass.

Emphasizing their commitment to sustainability, Vedanta stated that each company resulting from the demerger aims to achieve net-zero carbon emissions by 2050 and net water positivity by 2030. They plan to invest $5 billion over the next decade to accelerate this transition.

Notably, Hindustan Zinc, a Vedanta subsidiary, also disclosed plans for corporate restructuring to unlock growth, focusing on separate entities for zinc, lead, silver, and recycling businesses.

Hindustan Zinc experienced a surge of almost 6 percent. Vedanta holds a 64.92 percent stake in Hindustan Zinc as of the June quarter shareholding pattern.

Shares of Vedanta had ended 7 percent higher on Friday in what was its best single-day performance in 2023.

Shares of the Anil Agarwal-led mining conglomerate fell to a 31-month low earlier this week following Moody's Investors Service's downgrade of some of the bonds issued by its parent company Vedanta Resources Ltd. and its wholly-owned subsidiaries, as per a CNBC-TV18 report.

Vedanta's parent company faces repayment of notes worth nearly $2 billion in 2025. Including these bonds, the company is facing debt repayment worth $3.6 billion in the next financial year, according to Kotak Institutional Equities.