Vedanta Board Approves Demerger Of Business Units To Unlock Value

Vedanta Ltd. said its board approved the demerger of its business units into independent companies to unlock value and attract investment for expansion of each business.

“By demerging our business units, we believe that will unlock value and potential for faster growth in each vertical,” Vedanta Chairman Anil Agarwal said in a statement. “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 diversified natural resources conglomerate has a unique portfolio of assets among Indian and global companies with metals and minerals like zinc, silver, lead, aluminum, chromium, copper, nickel as well as oil and gas.

The group, whose traditional ferrous vertical includes iron ore and steel, also has power business, including coal and renewable energy, and it is now foraying into the manufacturing of semiconductors and display glass.

Demerger Overview

The Indian arm of UK-based Vedanta Resources said the board’s approved pure-play, asset-owner business model will ultimately result in six separate listed companies.

These entities will be Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Ltd., it added.

The demerger is planned to be a simple vertical split, the company said, adding that for every one share of Vedanta, the shareholders will additionally receive one share of each of the five newly listed companies.

Vedanta said the demerger will be conducted through a scheme process. Fling with the stock exchanges for Securities and Exchange Board of India’s approval is expected in October, it noted.

Demerger Rationale

Vedanta said the demerger simplifies the company’s corporate structure with sector focused independent businesses.

The other key demerger rationale includes:

• Provides opportunities to global investors, including sovereign wealth funds, retail investors and strategic investors, with direct investment opportunities in dedicated pure-play companies linked to India’s remarkable growth story through Vedanta’s assets.

• With listed equity and self-driven management teams, these demergers provide a platform for individual units to pursue strategic agendas more freely and better align with customers, investment cycles and end markets.

• Enables to better highlight, and for the market to more easily value, the technological advances, environmental stewardship and robust growth stories within Vedanta’s family of companies.

Capitalizing Growing Demand

Vedanta said the demerger aims to capitalize on India and the world’s growing demand for commodities, energy and technology, and will create world-class sector leading companies driving the next phase of growth.

Agarwal said India is on an unprecedented growth trajectory, which will make the country the third largest economy in the world before the end of this decade.

“The demand for minerals, metals, oil and gas and power is going to grow very rapidly and Vedanta’s businesses are uniquely positioned to service this rising demand and reduce reliance on imports,” he added.

Vedanta, which derives more than 90% of its profits in India, said the demand for commodities is expected to rise exponentially as the country continues to build infrastructure and strives to achieve aggressive targets for the energy transition.

Anagram Partners acted as legal advisor, Arpwood Capital acted as transaction and M&A advisor. BDO was appointed as valuers and ICICI Securities was financial advisor.

Hindustan Zinc Ltd., a subsidiary of Vedanta, is also going to evaluate corporate restructuring exercise to unlock value for stakeholders.

(Send feedback to editor@cornerofficejournal.com)