Vedanta demerger: Mining heavyweight drops 1% ahead of creditors meeting today

Shares of Vedanta dropped over 1% in opening trade on Tuesday as investors turned cautious ahead of its creditors meeting on a plan to demerge the mining heavyweight into five different businesses. Both secured and unsecured lenders will take a final call on the splitting of the mining conglomerate today and vote on it, as per the official statement issued by the company. The proposed demerger has already been approved by 75% of its secured creditors, stock exchanges, and the National Company Law Tribunal (NCLT).

Ahead of its creditors’ meeting, Vedanta share price declined as much as 1.3% to ₹409.65 in early trade today, while the market capitalisation slipped below ₹1.6 lakh crore. On Monday, the mining stock closed 0.52% higher at ₹415.10 on the BSE.

In September 2023, billionaire Anil Agarwal-led Vedanta had proposed to demerge its existing businesses into six independent entities, including Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel & Ferrous Materials, Vedanta Base Metals, and the existing Vedanta Limited. However, it later decided to exclude the "Vedanta Base Metals" demerger, which means there would at least five separate companies post demerger.

The Vedanta Base Metals demerger was deferred amid report that the company is finding alternative avenues to restart the copper business at Thoothukudi, which is part of the base metals unit.

As part of the demerger plan, all entities will listed as separate companies on domestic bourses. 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'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. 

As per the company, the demerger will help in simplifying Vedanta’s corporate structure by creating independent businesses and will offer global investors direct investment opportunities in pure-play companies linked to India's impressive growth.

Vedanta has a repayment obligation along with interest payment of $3-3.5 billion each in FY26 and FY27, while its parent, Vedanta Resources Ltd (VRL) has a repayment obligation along with interest payment of $1.4-1.7 billion each in FY26 and FY27 (which will reduce to less than $1 billion over FY28-FY29). This will mainly be serviced through dividends, and management and brand fee received from Vedanta.

So far this fiscal, the company has declared total interim dividend of ₹43.5 per share amounting to ₹16,798 crore as compared to ₹29.5 apiece worth ₹10,966 crore in FY24. In December, the board of company had approved the interim dividend of ₹8.5 per equity share, amounting to ₹3,324 crore.

The company has a strong track record of paying dividend to its shareholders, and its dividend yield stands at around 10.6%, which is the highest among the largecap stocks. Hindustan Zinc, a subsidiary of Vedanta, is second on the chart with a dividend yield of 7.08%. It has paid total dividend of ₹29 per share in the past 12 months.

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