Vedanta Announces Demerger Plan, To List Six Units To Unlock Value, Attract Investment

The board of Vedanta Ltd in a meeting today approved the plan with the aim to complete the process by 2025. The company is set to embrace a pure-play, asset-owner business model

Anil Agarwal's firm said for each share of Vedanta Limited held by shareholders, they will additionally receive one share in each of the newly listed companies. 

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Anil Agarwal-led mining giant Vedanta Limited on Friday unveiled its plan to demerge its business units into six independent "pure play" companies. The demerger plan aims to "unlock value and attract big-ticket investment into the expansion and growth of each of the businesses." The board of Vedanta Ltd in a meeting today approved the plan with the aim to complete the process by 2025. 

"We wish to inform you that the Board of Directors of the Company at their meeting held today, September 29, 2023, have granted their approval for demerger of diversified businesses unlocking significant value," the company said in a regulatory filing.

The company is set to embrace a pure-play, asset-owner business model, resulting in the creation of six distinct listed companies, namely:

1. Vedanta Aluminium
2. Vedanta Oil & Gas
3. Vedanta Power
4. Vedanta Steel and Ferrous Materials
5. Vedanta Base Metals
6. Vedanta Limited

The company said for each share of Vedanta Limited held by shareholders, they will additionally receive one share in each of the newly listed companies. 

Vedanta boasts a diverse portfolio of assets across Indian and global enterprises, encompassing metals and minerals such as zinc, silver, lead, aluminium, chromium, copper, and nickel. Additionally, it has a presence in the oil and gas sector, a traditional ferrous vertical encompassing iron ore and steel, and a significant presence in the power sector, including coal and renewable energy. Furthermore, Vedanta is venturing into the manufacturing of semiconductors and display glass, expanding its reach into innovative industries.

Once demerged, each independent entity will have greater freedom to grow to its potential and true value via an independent management, capital allocation and niche strategies for growth, the company further stated.

In addition to this, Hindustan Zinc Limited (HZL), a subsidiary of Vedanta Limited, has initiated a comprehensive review of its corporate structure, the exchange filing said. This move aims to unlock the latent potential value and establish separate legal entities for HZL's Zinc and lead, Silver, and Recycling businesses.

 

Anil Agarwal, Chairman of Vedanta, said, “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."

"In line with Vedanta’s ethos, each company will continue to retain a strong commitment to the well-being of our workforce, our communities and our planet. Even as we move to new ways of running our businesses, we will remain steadfast to transform for good,” he further added. 

On Friday, Vedanta's shares saw an upswing of nearly 7 per cent, closing at Rs 222.50 per share on the BSE.  Simultaneously subsidiary, Hindustan Zinc, witnessed an impressive gain of almost 6 per cent, reaching a day's high of Rs 317.50. 

Notably, the demerger also intends to enhance valuations, which arises as Vedanta Resources, the UK-based parent firm of the company, faces challenges in securing funds. These hurdles reportedly are attributed to credit rating downgrades and uncertainties regarding meeting its debt commitments.