Vedanta Says It Won’t Have Any Exposure In Anglo American After Exit
The decision has been taken in the interest of shareholders, says Vedanta CEO Srinivasan Venkatakrishnan.
Vedanta Ltd., which plans to exit its investment in Anglo American Plc., said Thursday it will neither have any further economic exposure in the South African miner’s shares nor does it intend to enter into similar related-party transactions in the future.
“The decision has been taken in the interest of shareholders,” Srinivasan Venkatakrishnan, chief executive officer at Vedanta, said while replying to a BloomberQuint’s query during a conference call.
Vedanta shares aren’t pledged in this transaction, he said, adding that the company’s strategy continues to be to focus on existing businesses where there are significant opportunities to unlock full potential.
Vedanta’s parent, Volcan Investments Ltd., and its subsidiary Cairn India Holdings will unwind the structured investment in Anglo American ahead of the “originally envisaged schedule”, according to an exchange filing.
Shares of Anglo American Plc, Vedanta said, have nearly doubled since Volcan’s investment, delivering attractive gains to all investors. Cairn India, which paid Volcan $200 million for an interest in Anglo American in December, has delivered a net gain of more than $100 million in eight months, an annualised return of around 58 percent. Vedanta planned to invest Rs 2,000 crore more in the next 20 months. It had invested Rs 1,800 crore till March. Cash proceeds from the settlement of the transaction will be paid to Cairn India on Aug. 13, the filing said.
This allays investor fears as Vedanta had sparked corporate governance concerns after buying an interest in the South African miner from the Indian group’s controlling shareholder and billionaire Anil Agarwal’s family trust.
The transaction was an overhang on Vedanta given its related-party nature and a possibility of a merger with Anglo in long term, Motilal Oswal said in a note.
Agreed Edelweiss Securities’ Amit Dixit. “This development is positive and removes the overhang on the stock. It allays investors’ concerns around capital allocation policy,” the analyst at the research firm told BloombergQuint. Also, ICICI Securities upgraded Vedanta to ‘Hold’ from ‘Reduce’ with a revised target of Rs 168 a share.
Vedanta’s stock had plunged nearly 18 percent on Feb. 1—a day after the firm disclosed this investment in a note to its earnings filing. Since then, it has managed to gain close to 6 percent. The number of ‘Buy’ ratings on the stock after the Anglo American investment had fallen to nine from 13 as brokerages cited the deal as an overhang on the company’s shares.
Shares of Vedanta today fell as much as 3.4 percent compared with a 0.2 percent drop in the benchmark Nifty 50 Index. It’s also the worst performer on the Sensex and Nifty.
Key Highlights From Concall
- Volcan/Vedanta now would not have any interest in Anglo American Plc.
- Vedanta’s related-party transactions have always been reported transparently.
- Decision shows our discipline to treasury management.
- Vedanta has enough investment opportunities in its core business.
- Targeting return of 25-30 percent from such business opportunities.