Anil Agarwal-led mining giant Vedanta Ltd plans to demerge its business units into six independent “pure play” companies to "unlock value" and attract investment. The six separate listed companies will be Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals, and Vedanta Ltd.
The demerger is planned to be a simple vertical split, for every 1 share of Vedanta Ltd, the shareholders will additionally receive 1 share of each of the 5 newly listed companies.
Vedanta says demand for commodities is expected to rise exponentially as the country continues to build world-class infrastructure and strives to achieve aggressive targets for the energy transition, which is highly mineral intensive.
"The government of India’s emphasis on self-reliance will provide avenues for rapid growth for Indian companies in the commodities space."
Vedanta's business portfolio spans assets in zinc, silver, lead, aluminum, chromium, copper, and nickel; oil and gas; a traditional ferrous vertical including iron ore and steel; and power, including coal and renewable energy; and semiconductors and display glass.
Once demerged, says Vedanta, 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. Additionally, it'll help the group attract global and Indian investors.
In its rationale behind the demerger of the business, Vedanta says it simplifies Vedanta’s "corporate structure", with sector focussed independent businesses. Also, the demerger will provide opportunities to global investors, including sovereign wealth funds, retail investors, and strategic investors, with direct investment opportunities in these dedicated pure-play companies, says Vedanta.
Anil Agarwal, chairman of Vedanta, says 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.
Vedanta is also foraying into semiconductors and display glass which are of great strategic significance to India, he adds. "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," says Agarwal.
In addition to this, Hindustan Zinc Ltd (HZL), a subsidiary of Vedanta, today announced a comprehensive review of its corporate structure for unlocking "potential value" and its intention to create separate legal entities for undertaking the zinc & lead, silver, and recycling business of HZL.
Vedanta Ltd, a subsidiary of Vedanta Resources Limited, is one of the world’s leading natural resources companies spanning across India, South Africa, Namibia, Liberia, UAE, Korea, Taiwan and Japan. Vedanta's profit fell 40.84% to ₹3,308 crore in the April-June quarter on lower income. Its Q1 revenue fell to ₹34,279 crore from ₹39,355 crore in the year-ago period.
Vedanta stock closed 6.86% up at ₹222.65, compared to the previous session close of ₹208.35, on the NSE.