Vedanta announces demerger of diversified businesses unlocking significant value

 Vedanta Limited, India’s largest diversified natural resources company with a significant global footprint announces its plan to demerge its business units into independent “pure play” companies to unlock value and attract big ticket investment into the expansion and growth of each of the businesses. Vedanta is committed to best-in-class ESG practices and has a strong focus on metals critical for transition to green economy.

 

The announcement comes at a time when India is forecast to be the fastest growing major economy for the next several years. More than ninety percent of Vedanta Ltd’s profits are derived in India. Demand for commodities is expected to rise exponentially as the country continues to build a world class infrastructure and strives to achieve aggressive targets for the energy transition which is highly mineral intensive. The Government of India’s emphasis on self-reliance will provide avenues for rapid growth for Indian companies in the commodities space.  

 

Vedanta has a unique portfolio of assets among Indian and global companies with metals and minerals – zinc, silver, lead, aluminium, chromium, copper, nickel; oil and gas; a traditional ferrous vertical including iron ore and steel; and power, including coal and renewable energy; and is now foraying into manufacturing of semiconductors and display glass. 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. 

 

In pursuit of this goal, the Vedanta Limited Board approved a pure-play, asset-owner business model that will ultimately result in six separate listed companies, namely: 

  • Vedanta Aluminium
  • Vedanta Oil & Gas
  • Vedanta Power
  • Vedanta Steel and Ferrous Materials 
  • Vedanta Base Metals 
  • Vedanta Limited 

The de-merger is planned to be a simple vertical split, for every 1 share of Vedanta Limited, the shareholders will additionally receive 1 share of each of the 5 newly listed companies.

 

In addition to this, we note today’s announcement from Hindustan Zinc Limited (HZL, a subsidiary of Vedanta Limited), whereby their Board announced a comprehensive review of its corporate structure for unlocking potential value and intention to create separate legal entities for undertaking the Zinc & Lead, Silver and Recycling business of HZL. 

 

The announcement is also available on the exchange website at www.bseindia.com and www.nseindia.com and HZL website at www.hzlindia.com.   

Rationale for Demerger:

  1. Simplifies Vedanta’s corporate structure with sector focussed independent businesses.
  2. Provides opportunities to global investors, including sovereign wealth funds, retail investors and strategic investors, with direct investment opportunities in dedicated pure-play companies linked to India’s remarkable growth story through Vedanta’s world class assets.
  3. With listed equity and self-driven management teams, these demergers provide a platform for individual units to pursue strategic agendas more freely and better align with customers, investment cycles and end markets.
  4. Enables to better highlight, and for the market to more easily value, the remarkable technological advances, environmental stewardship and robust growth stories within Vedanta’s family of companies.

 

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.”

 

 

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