You are here: Home » Companies » News
Business Standard

Vedanta business spinoff may not affect parent's credit quality: Moody's

Currently, there is no separate disclosure on free cash flow generation by the different businesses; after spinoff each entity will report separate financials

Topics
Vedanta  | Shareholders | Moody’s

Aditi Divekar  |  Mumbai 

Vedanta
Vedanta

The spinoff of Anil Agarwal-led Limited’s (VDL) businesses into separate listed companies, which will result in three new listed entities with a shareholding mirroring that of VDL is not likely to affect credit quality of Resources assuming it proceeds as currently expected. This is because Resources Limited’s (VRL) economic interests in all businesses will remain unchanged, a Moody’s report said on Monday.

Vedanta Resources Limited's 65.2 per cent owned subsidiary, Vedanta Limited (VDL), announced that its board of directors have formed a subcommittee to evaluate a potential spinoff of its aluminum, iron and steel, and oil and gas businesses into separate listed

Following the subcommittee's evaluation of a potential spinoff, the board could also consider other alternatives such as strategic partnerships that would unlock value in its businesses for its

The spinoff will be subject to approvals from regulators, the company's board, and creditors.

VDL noted that its board's rationale in evaluating a spinoff/strategic partnership is to unlock value for its and to help in better transparency in the deployment of the cash surpluses from each business towards reinvestment or towards dividends.

In the current structure, there is no separate disclosure on the free cash flow generation by the different businesses.

But after spinoff each entity will report separate financials, VRL's consolidated profile will continue to draw the benefits of a diversified business model in maintaining profitability amid volatile commodity price cycles.

Following the spinoff, the VRL group will comprise five listed entities. Four of them, VDL and the three newly listed will have the same shareholding. The group's listed zinc subsidiary, Hindustan Zinc Limited (HZL) will continue to be 64.9 percent owned by VDL. VRL's consolidated credit metrics remain unchanged because its economic interest in all of its businesses will be the same with the spinoff.

“We expect VDL's standalone debt to be transferred to the three listed equitably,” said Moody’s.

Importantly, we expect VRL to continue to exercise management control over VDL and HZL, and for the same governance in its management of the new listed companies, it said.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Mon, November 22 2021. 17:45 IST
RECOMMENDED FOR YOU
.