Vedanta sets up new copper unit in Saudi Arabia; stock down 2%

Vedanta shares continued their losing streak for the fourth consecutive session on Thursday even after billionaire Anil Agarwal-led company established a new copper unit in Saudi Arabia. The stock of the mining giant has fallen 3.7% in the last four sessions.

Early today, shares of Vedanta opened higher at ₹241.25 against the previous closing price of ₹240.70 on the BSE. In the opening trade, the mining heavyweight dropped as much as 1.8% to hit a low of ₹236.25, while the market capitalisation slipped to ₹88,246 crore.

At the current level, Vedanta shares are down 30% from its 52-week high of ₹340.75 touched on January 20, 2023. However, the stock has risen nearly 14% from its 52-week low of ₹207.85 touched on September 28, 2023.

In a post-market release on Wednesday, Vedanta said that Malco Energy Limited, a wholly-owned subsidiary of the company, has incorporated a new wholly-owned subsidiary ‘Vedanta Copper International VCI Company Limited’ on November 14, 2023, for SAR (saudi riyal)  1,00,000.

The new subsidiary has been established for exploring growth opportunities in new geographies. Vedanta Copper International proposes to set up a copper rod manufacturing unit in the Kingdom of Saudi Arabia.

The development came months after the mining conglomerate announced the demerger of its diversified business into six separate listed companies.

In a video message to shareholders, Chairman Anil Agrawal on August 25 said that Vedanta is mulling separately listing all or some businesses, based on feedback from advisors. In September, the board of the company gave a nod to split the business into six separately listed entities.

As per the proposed demerger, Vedanta will be split into Vedanta Aluminum, Vedanta Oil and Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Ltd, which will be listed as separate entities 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. 

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.

Vedanta’s demerger plan is being seen as part of the group’s strategy to help its parent company manage its debt load. The London Stock Exchange (LSE)-listed Vedanta Resources (VRL) is the parent company of Vedanta, which has to repay term debt worth $4.2 billion in FY24.

As per report, VRL is in talks to raise up to $2.5 billion (about Rs 20,800 crore) to repay overseas bondholders. Besides, VRL is also looking to offload part of its 63.71% stake in the Mumbai-based subsidiary Vedanta to meet funding requirements.

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