'Unlocking significant value': Vedanta to spin off, list six commodities businesses

Metals-to-oils conglomerate Vedanta Ltd said on Friday it plans to separate its commodities businesses into six listed companies "to unlock value and attract big ticket investment into the expansion and growth of each of the businesses". Vedanta said its Board approved a "pure-play, asset-owner business model that will ultimately result in six separate listed companies".

"We wish to inform that the Board of Directors of the Company at their meeting held today, September 29, 2023, have granted their approval for demerger of diversified businesses unlocking significant value," said Vedanta in a stock exchange filing.

The six listed companies will be Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Limited. The company's UK-based parent, Vedanta Resources, has seen major agencies cut its ratings on concerns over debt repayments, with S&P Global Ratings downgrading it to "CCC" from "B-" on Friday and placing it on credit watch.

Anil Agarwal, Chairman of Vedanta, stated: “This is an exciting announcement for Vedanta, and India. Our country is on an unprecedented growth trajectory which will make us 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. Vedanta is also foraying into semiconductors and display glass which are of great strategic significance to India.

"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.”

For each share of Vedanta Limited, the stockholders will receive one additional share of each of the five companies that will be listed. The demerger plans, aimed at driving better valuations, come as Vedanta Resources, the UK-based parent of the company, struggles to raise funds due to rating downgrades and concerns over meeting its debt obligations.

Shares of Vedanta rose 6.8% on Friday following reports of the split.

Vedanta Limited will remain as an incubator for new businesses, including Vedanta’s technology verticals. For display manufacturing, Vedanta said it has finalised a technology partnership with Taiwanese firm Innolux and is also close to finalise partnership for Semiconductor manufacturing. "Once demerged, each independent entity will have greater freedom to grow to its potential and true value via an independent management, capital allocation and niche strategies for growth. It will also give global and Indian investors potential to invest in their preferred vertical, broadening the investor base for Vedanta assets," said Vedanta.

Vedanta Aluminium will be run by John Slaven, formerly of Alcoa and BHP. Vedanta Power will be run by Vibhav Agarwal. Vedanta Base Metals will be run by Chris Griffith. Vedanta Limited will be run by Arun Misra.

"The new companies will remain committed to achieving net-zero carbon emissions by 2050 and net water positivity by 2030 with the aims to spend $5 billion over the next 10 years to accelerate this transition. In the process of transitioning to net zero we already secured 1.8 GW of Renewable Energy through power delivery agreement across our group companies," said Vedanta.

The entire restructuring process is expected to be completed by financial year 2025, subject to approvals. Filing with stock exchanges for approval from the country's markets regulator is expected during October 2023, Vedanta said.

Vedanta said the demerger will be conducted through scheme process: Board approval obtained; filing with stock exchanges for SEBI approval expected during October 2023; subject to approvals, the process is expected to be completed in FY25.

Earlier on Friday, Vedanta's unit Hindustan Zinc Ltd said it plans to create separate entities for its zinc, lead, silver and recycling businesses to unlock "potential value" and will appoint external advisors to review its corporate structure.