Vedanta mulls value-unlocking through separate listing of businesses

In a bid to unlock value and simplify its corporate structure, Anil Agarwal-led Vedanta Limited on Wednesday said it had appointed a committee of directors to evaluate and recommend a range of options and alternatives, including demergers, spin-offs or strategic partnerships of its aluminium, iron & steel, and oil & gas businesses. The move comes more than a year after the parent company Vedanta Resources’ unsuccessful bid to take Vedanta Limited private.

Subject to a detailed evaluation, it is the intention that these businesses would be housed in standalone listed entities, Vedanta Limited said in an exchange filing.

“This step, whilst pending a detailed evaluation, 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,” the group's chairman, Anil Agarwal, was quoted as saying.

The board has also appointed various advisors to assist in evaluating the options, said the filing.

“Over the past few years, the group has materially improved the operational performance of the businesses, increased cash flows, reduced debt whilst concomitantly focusing on accelerating investments in energy transition, health and safety, diversity, and ESG in general,” Agarwal said.

When contacted, the company refrained from giving any timeline for the completion of the evaluation process.

“These are early days and we believe that this is likely to result in value unlocking, but we would keep a close tab on the revised corporate structure and shareholding pattern,” said Amit Dixit, analyst-metals at Edelweiss Securities.

Recent aggressive targets in ESG (environmental, social, and governance) are more applicable to aluminium business and, hence, would get better appreciation and focus if it were a standalone business, Dixit added.

For the last few quarters, the company’s aluminium business has been contributing the highest in terms of its top line at the consolidated level. In the September quarter, despite an acute shortage of coal, the company’s aluminium production remained unaffected.

“Since its (Vedanta’s) delisting attempt failed, it could not get access to cash. So by separately listing some businesses, the company/group could look to monetise and generate cash to lower its debt,” said a Mumbai-based analyst on condition of anonymity.

The company’s consolidated debt as on September 30, 2021 stood at $6.9 billion (Rs 51,040 crore) with 89 per cent debt in rupee and 11 per cent in foreign currency. Of this, Vedanta Limited’s standalone debt stands highest at Rs 30,462 crore with cash and cash equivalent of just about Rs 1,697 crore.

Last year, the group's attempt to delist Vedanta Limited from the Indian stock exchanges failed as it was unable to garner the number of shares required to complete its process. It was able to garner offers for around 1.25 billion shares, as against the 1.34 billion shares required for the delisting process to go through.

Shares of Vedanta Limited on Wednesday ended at Rs 338.40 per share on the BSE, up 1.81 per cent from the previous close, taking the gains in November to over 11 per cent. The announcement regarding the restructuring of businesses came post market hours on Wednesday.