Vedanta breakup would create 4 metals companies

New Delhi-based conglomerate Vedanta Ltd. has announced a plan to conduct a demerger to spin off its business units into six independent “pure play” companies. Three of those companies would have a presence in the metals industry, while the other two are within the energy sector. Another spinoff within one of the business units could create a fourth metals-focused company.

The late-September announcement by Vedanta says the aim of the demerger is “to unlock value and attract big-ticket investment into the expansion and growth of each of the businesses.”

The six companies to be created if the plan is carried out are Vedanta Aluminium, Vedanta Steel and Ferrous Materials, Vedanta Base Metals, Vedanta Oil & Gas, Vedanta Power and Vedanta Ltd.

Additionally, the company says the board of the Hindustan Zinc Ltd. (HZL) subsidiary of Vedanta Ltd. could seek to create separate legal entities for undertaking the zinc and lead, silver and recycling business of HZL.

Vedanta says more than 90 percent of its 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 company says.

As currently configured, Vedanta says it has a unique portfolio of assets among Indian and global companies with metals and minerals—zinc, silver, lead, aluminum, chromium, copper and nickel; oil and gas; a ferrous vertical including iron ore and steel; power, including coal and renewable energy; and, more recently, a foray into the manufacturing of semiconductors and display glass.

“Once 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,” Vedanta says.

“This is an exciting announcement for Vedanta and India,” says Anil Agarwal, board chair of Vedanta. “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 says its demerger is planned as a vertical split: for every one share of Vedanta Ltd., shareholders will additionally receive one share of each of the five newly listed companies.