Dual-listed miner Vedanta’s board has approved the demerger of its diversified businesses into separate subsidiaries. The exercise will result in a demerged Vedanta and five wholly-owned subsidiaries.
The first subsidiary will hold aluminium assets, the second the merchant power undertaking of the group, the third the oil and gas undertaking of the group and the fourth subsidiary will hold the base metals undertaking.
The fifth and final subsidiary will hold the group’s iron-ore undertaking.
Currently, companies one, four and five are in the process of incorporation.
According to newswire service Reuters, chairperson Anil Agarwal said last month that the group would consider separately listing all or some of its businesses, in contrast to a failed attempt in 2020 to delist the company to speed up the process of simplifying its corporate structure.
Newswire service Bloomberg added that the move to create subsidiaries would help Agarwal to manage the group’s debt.
Resolving a byzantine corporate construct has been a priority for years for the indebted Vedanta, Bloomberg continued, adding that $2-billion worth of bonds are due to be redeemed next year.
Bloomberg explained the group’s August 2024 and March 2025 bonds are trading below 75c on the dollar, levels which are typically considered “distressed”.
A streamlined structure could also help the group to hive off unprofitable or low-growth assets, while allowing investors to come on board some of the group’s newer ambitions.
Vedanta says in a release that, once the divisions are demerged, 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. It will also give global and Indian investors potential to invest in their preferred vertical, broadening the investor base for Vedanta assets.
The de-merger is planned to be a simple vertical split. For every one share in Vedanta Limited, the shareholders will additionally receive one share of each of the five newly listed companies.
Agarwal comments India is on an unprecedented growth trajectory, which will make it the third-largest economy in the world before 2030.
“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 its business units, Vedanta believes it 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 its workforce, communities and the planet. “Even as we move to new ways of running our businesses, we will remain steadfast to transform for good,” Agarwal concludes.