Vedanta Weighs Demerger To Simplify Corporate Structure
plans to review its corporate structure more than a year after its proposal to go private .
The Anil Agarwal-led mining conglomerate said it has appointed advisers to assist it in evaluating options and alternatives, including demerger, spinoff, and strategic partnerships, to unlock value and simplify corporate structure, according to its statement.
The metals to mining group intends to house its aluminium, iron and steel, oil and gas units in standalone listed entities. The company’s board and advisers will complete their evaluation and suggest steps soon.
Vedanta’s delisting offer failed in October 2020 after it received a large number of unconfirmed bids and technical glitches marred the tender process. The delisting offer was made by parent Vedanta Resources Ltd. along with two other promoter entities.
"From an oversight perspective, this move would be better as every business will have to run its own show and be accountable to the shareholders," Amit Dixit, assistant vice president-research at Edelweiss Securities, told BloombergQuint.
He said delisting isn't part of this agenda and at this stage it's unlikely Vedanta would spin off silver business or potentially merge Zinc International with Hindustan Zinc Ltd. There could be a structure such as the Tata Group or the Aditya Birla Group where different listed entities work under the same ambit, he said.
According to the statement, the strategic objectives behind the exercise are:
Simplification and streamlining of corporate structure.
Unlocking value for all stakeholders.
Creation of businesses which are positioned better to capitalise on their distinct market positions and deliver long-term growth and enable strategic partnerships.
Tailored capital structure and capital allocation policies based on business-specific dynamics.
Distinct investment profiles to attract deeper and broader investor bases.
Accelerate emissions reduction and strong ESG (environmental, social and corporate governance) practices.
This step is designed to create independent, industry-leading, global public companies, where each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees, according to Anil Agarwal, chairman of Vedanta Resources.
In 2017, oil producing major Cairn India merged with its parent Vedanta, consolidating the company's position as one of the world's largest diversified natural resources company. The debt-ridden Vedanta absorbed its cash-rich subsidiary. The merger was expected to increase Vedanta’s appeal to global investors as it simplifies the structure and increases the size and free float of the company.
In 2012, Vedanta Resources said it would merge all its Indian firms, including Sterlite Industries and Sesa Goa, into a single entity, named Sesa Sterlite, and Vedanta was to hold 58.3% stake in the new company. Unlisted Vedanta Aluminium, Madras Aluminium and Vedanta's 38.8% holding in oil and gas producer Cairn India were then to be transferred to Sesa Sterlite.