Anil Agarwal's Vedanta announces demerger; to split into 6 listed companies

Indian billionaire Anil Agarwal-led Vedanta Resources today announced that its board has approved the demerger of diversified businesses, resulting in the creation of six separate listed companies.

What is the purpose of demerger?

According to Vedanta, The demerger is aimed at simplifying its corporate structure, allowing each sector-focused business to operate independently, and providing global investors with direct investment opportunities in dedicated pure-play companies linked to India’s growth story through Vedanta’s assets.

The demerger would allow each unit to pursue strategic agendas more freely and better align with customers, investment cycles, and end markets. It also enables the market to easily value the technological advances, environmental stewardship, and robust growth stories within Vedanta’s family of companies.

The development comes at a time when Vedanta is foraying into semiconductors and display glass which are of great strategic significance to India.

“This is an exciting announcement for Vedanta, and India. Our country is on an unprecedented growth trajectory which will make us the third largest economy in the world before the end of this decade. 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," said Anil Agarwal, Chairman of Vedanta.

"By demerging our business units, we believe that will unlock value and potential for faster growth in each vertical. While they all come under the larger umbrella of natural resources, each has its own market, demand and supply trends, and potential to deploy technology to raise productivity. In line with Vedanta’s ethos, each company will continue to retain a strong commitment to the well-being of our workforce, our communities and our planet. Even as we move to new ways of running our businesses, we will remain steadfast to transform for good," Anil added.

What will be the focus of the six entities?

1. Vedanta Aluminium: This company is the largest single-location aluminium smelting facility outside of China, focusing on growing the production of green aluminium under the Restora brands.

2. Vedanta Oil & Gas: It is the largest private oil, gas, and sweet crude exploration and production company in India, aiming to contribute 50% to India’s total Oil and Gas production.

3. Vedanta Power: This entity will house the Independent Power Plants at Vedanta, aiming to be one of the largest private independent power players in India.

4. Vedanta Steel and Ferrous Materials: This vertical includes Iron Ore Business and ESL Steel Limited, aspiring to more than double annual iron ore production by 2025.

5. Vedanta Base Metals: This unit will contain international base metal production assets, growth projects, and downstream businesses critical to global energy transition.

6. Vedanta Limited: It will remain as an incubator for new businesses including Vedanta’s technology verticals, providing investors with the opportunity to invest in leading zinc production assets and nascent technology companies.

According to Vedanta, Each of the new entities is aimed at achieving net-zero carbon emissions by 2050 and net water positivity by 2030, with plans to spend $5 billion over the next 10 years to accelerate this transition. 

Vedanta said the demergers will be conducted through a scheme process, with Board approval already obtained. Filing with stock exchanges for SEBI approval is expected in October 2023, following the customary process as per Indian law, the company said in an exchange filing.

A look at the financial background of six new entities

1. Vedanta Aluminium - The company's consolidated revenue stands at Rs 52,618 crore, with an EBITDA of Rs 5,775 crore and an operating profit of Rs 3,257 crore.
2. Vedanta Oil & Gas's consolidated revenue is recorded at Rs 15,038 crore, EBITDA at Rs 7,782 crore, and the operating profit is Rs 5,205 crore.
3. Vedanta Power's consolidated revenue for this period is Rs 6,724 Crore, with an EBITDA of Rs 913 crore and an operating profit of Rs 294 crore.
4. Vedanta Steel and Ferrous Materials: The company has reported consolidated revenue of INR 13,882 Crore in FY 2023. The EBITDA for the same period is Rs 1,302 crore, and the operating profit is Rs 770 crore.
5. Vedanta Base Metals: has posted a consolidated revenue of Rs 22,700 crore in FY 2023. The EBITDA and operating profit for the same period are Rs 1,930 crore and Rs 1,243 crore, respectively.
6. Vedanta Limited, which serves as an incubator for new businesses including Vedanta’s technology verticals, has reported consolidated revenue of Rs 34,442 crore for FY 2023. The EBITDA is Rs 17,539 crore, and the operating profit is Rs 13,917 crore.

Also Read:

• Nithin Kamath reveals Zerodha's valuation