Vedanta Ltd to Demerge Key Businesses for Shareholder Value
Vedanta Ltd, owned by billionaire Anil Agarwal, has unveiled plans to demerge five of its critical businesses into separate listed entities, aiming to create substantial shareholder value. The company’s Board of Directors approved this strategic move, which will transform Vedanta Limited into six distinct listed entities, each with a specific focus:
|Independent Verticals||Focus Areas|
|Vedanta Aluminium||Aluminium Production|
|Vedanta Oil and Gas||Oil and Gas Exploration|
|Vedanta Power||Power Generation|
|Vedanta Steel and Ferrous Materials||Steel Manufacturing|
|Vedanta Base Metals||Base Metals Production|
|Vedanta Limited||Overall Diversified Holdings|
The demerger will be structured as a simple vertical split. For every one share of Vedanta Limited, shareholders will receive one share in each of the five newly listed companies. This move aims to unlock the inherent value of each vertical and facilitate faster growth within their respective markets.
Vedanta Limited boasts a diverse portfolio that spans metals and minerals such as zinc, silver, lead, aluminium, chromium, copper, and nickel. Additionally, the company is involved in oil and gas exploration, traditional ferrous verticals including iron ore and steel, power generation (including coal and renewable energy), and is making forays into the manufacturing of semiconductors and display glass.
Anil Agarwal, Chairman of Vedanta, expressed his optimism about the demerger, 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. 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.”
It’s important to note that this strategic move will require approvals from shareholders and regulatory authorities, a process expected to take two to three months. As the company’s valuation currently stands at 776.29 billion rupees ($9.33 billion), this demerger aims to revitalize Vedanta’s performance, which has seen a decline of about a third this year.
Anil Agarwal had previously announced his intention to separately list some or all of Vedanta’s businesses, marking a shift from his unsuccessful attempt in 2020 to delist Vedanta in a bid to streamline the corporate structure. Earlier this year, Agarwal sought to reduce the group’s debt burden of $7.7 billion by arranging for Hindustan Zinc Ltd, a Vedanta Ltd subsidiary, to acquire certain zinc assets from the parent company in a $2.98 billion deal. However, this move faced opposition from the government, which holds nearly 30% stake in Hindustan Zinc.
As Vedanta Ltd embarks on this transformative journey, it seeks to maximize value for its stakeholders while navigating the complex landscape of demergers and restructuring.
(With agency inputs)