Vedanta demerger: Mining giant scraps base metals demerger plans amid copper business revival effort

Mining giant Vedanta on December 20 announced that it will not create a separate listed entity for its base metals business after discussions with its stakeholders and lenders, as per a Reuters report. 

“Lenders believe the scheme would be more favourable for unlocking value and overall optimal balancing of debt allocation across residual Vedanta and resulting companies if the Vedanta base metals undertaking is retained in residual Vedanta itself,” it said in an exchange filing. 

Vedanta cited it ongoing exploration of alternative avenues for restarting the copper business (at Thoothukudi, Tamil Nadu), which is an integral part of its base metals undertaking, as the reason behind the move. 

The non-implementation of demerger of the base metals undertaking and retaining the same in Vedanta will not affect the overall value creation as envisioned, the company said. 

The shareholders will continue to enjoy value unlocking of the Vedanta Base Metals business as part of legacy residual Vedanta where they will remain shareholders in addition to receiving equivalent shares in other resulting companies, which will mirror Vedanta shareholding. The shareholders’ beneficial interests in the overall value of Vedanta and resulting companies will remain unaffected, it added. 

While the base metals business demerger will be considered at a later stage, Vedanta stated in an exchange filing that the share entitlement ratio for the separation of the remaining five businesses will remain unchanged. 

In September 2023, Vedanta Ltd, a metals-to-oils conglomerate, revealed plans to split its commodity operations into six publicly listed companies, aiming to unlock value and attract substantial investment for the growth of each sector. 

The six listed entities would have been Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Limited. 

As part of the vertical split, shareholders will receive one share in each of the newly listed companies for every share they hold in Vedanta. Following the demerger, Hindustan Zinc’s businesses and the display and semiconductor manufacturing units will remain with Vedanta Limited, it had said. 

In an exclusive interview with Business Today TV, Anil Agarwal said, “My vision is for each of these companies to be as large as Vedanta itself. Shareholders will receive one share in each of the newly listed entities for every one share they hold in the current Vedanta Ltd.,” Agarwal explained. “Each company will have its own CEO, who will also be a stakeholder, ensuring that the companies are run by the best experts.” 

Q2 results  

Vedanta reported a net profit of Rs 5,603 crore in the September 2024 quarter against Rs 915 crore loss on a year-on-year (YoY) basis. On a quarter-on-quarter basis, profit rose 10% from Rs 5,095 crore. Revenue climbed 10% to Rs 37,171 crore in Q1FY25 against Rs 33,738 crore revenue in Q2FY24.  

Consolidated EBITDA of the metal and mining firm rose 44% YoY to Rs 10,364 crore in the last quarter against Rs 7197 crore. The company attributed rise in EBITDA due to favourable output commodity prices, structural cost saving initiatives and increased premia across businesses. Gross debt stood at Rs 78,654 crore as on September 30, 2024. 

Its net debt stood at Rs 56,927 crore as on September 30, 2024 and declined by Rs 4,400 crore against June 2024 quarter.