Vedanta demerger faces delay as Centre objects, Sebi issues warning

Vedanta's plan to split into six listed entities has been delayed after the Centre objected and SEBI issued a compliance warning, intensifying regulatory scrutiny

Billionaire Anil Agarwal-owned Vedanta Ltd’s ambitious plan to split into six listed entities has run into further delays after the National Company Law Tribunal (NCLT) on Wednesday adjourned its hearing to next month, even as market regulator Securities and Exchange Board of India (Sebi) issued a separate warning to the company over compliance lapses.

 

The NCLT in Mumbai postponed the matter to September 17 after the Ministry of Petroleum and Natural Gas (MoPNG) objected to the restructuring. The ministry argued that the proposed breakup could impair its ability to recover dues owed under production and revenue-sharing contracts linked to Vedanta’s oil and gas business.

 

 

Vedanta’s counsel submitted a counter-response but was unable to conclude arguments, prompting the adjournment. The company sought to reassure the tribunal by offering a corporate guarantee in favour of MoPNG once the scheme became effective. This guarantee, Vedanta said, would cover potential contractual liabilities of Malco Energy Ltd (MEL), the unit that would house its oil and gas operations post-demerger.

 

“This is in the event MEL is unable to meet or satisfy potential contractual liability, if any, towards MoPNG arising under the production sharing contracts and revenue sharing contracts,” a company spokesperson said. Vedanta reiterated that it remains committed to “delivering long-term value” to shareholders and stakeholders.

 

The regulatory scrutiny has weighed on investor sentiment. Vedanta’s shares closed 1 per cent lower at ₹445 on Wednesday, underperforming the broader market.

 

Adding to the pressure, Sebi issued an administrative warning to Vedanta in a letter dated August 13. The regulator said the company altered its scheme of arrangement after receiving a no-objection certificate (NOC) from exchanges, without seeking Sebi’s explicit written consent as mandated under its master circular. The breach, first flagged by the BSE, was described as a “serious” lapse.

 

The market regulator cautioned Vedanta that repeat violations would attract enforcement action under the Sebi Act, and directed the company to place the warning before its Board and report corrective steps.

 

In a statement, Vedanta pushed back, stressing that Sebi has not opposed the demerger. It pointed to the regulator’s July 16 affidavit, stating it had “no further comments” and that the tribunal could proceed. “The Sebi letter is cautionary in nature and does not impose any financial or operational restrictions,” the spokesperson said, adding that the issue has no material impact on its operations or financials.

 

The twin challenges underscore the rising scrutiny on Vedanta’s restructuring. First unveiled in 2023, the plan involves hiving off its businesses into six independent, pure-play listed entities spanning aluminium, oil and gas, power, steel, base metals, and Vedanta Ltd. The company has argued that the move would simplify its sprawling corporate structure, sharpen management focus and unlock shareholder value.

 

The restructuring is also widely seen as critical to the financial health of Vedanta Resources Ltd, the London-based parent owned by Agarwal, which is saddled with a heavy debt burden. By creating standalone listed entities, Vedanta expects to give investors direct exposure to its high-growth businesses while enhancing flexibility in fundraising and debt management.

 

Still, the latest objections from MoPNG and Sebi have injected fresh uncertainty into the timeline. Analysts say regulatory pushback could prolong the process, though the company remains confident of eventual approval.

 

Separately, Vedanta faced a setback this week after the Supreme Court ruled against its Talwandi Sabo Power Ltd unit in a contractual dispute with Punjab State Power Corp Ltd over customs duty benefits under India’s mega power policy. The company said the ruling relates to a legacy matter unrelated to the demerger and that it is evaluating legal options.

 

For Agarwal, who has long pitched the breakup as a way to highlight Vedanta’s portfolio strengths, the coming months will be crucial. With the tribunal scheduled to resume hearings in September, and regulators tightening oversight, the group’s ability to convince stakeholders may determine whether the long-delayed demerger can move forward.

 

The group has also come under sharp attack from short-seller Viceroy Research, which has highlighted how the London-based parent used a hefty dividend from its India-listed subsidiary to repay its own debt. Vedanta has denied the allegations.