Vedanta Limited, India’s largest diversified natural resources company with a significant global footprint announces its plan to demerge its business units into independent “pure play” companies to unlock value and attract big ticket investment into the expansion and growth of each of the businesses, the company announced through an exchange filing.
The announcement comes at a time when India is forecast to be the fastest growing major economy for the next several years. More than ninety percent of Vedanta Ltd’s 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 Government of India’s emphasis on self-reliance will provide avenues for rapid growth for Indian companies in the commodities space.
Once demerged, each independent entity will have greater freedom to grow to its potential and true value via an independent management, capital allocation and niche strategies for growth. It will also give global and Indian investors potential to invest in their preferred vertical, broadening the investor base for Vedanta assets.
In pursuit of this goal, the Vedanta Limited Board approved a pure-play, asset-owner business model that will ultimately result in six separate listed companies, namely: •
Vedanta Aluminium
Vedanta Oil & Gas
Vedanta Power
Vedanta Steel and Ferrous Materials
Vedanta Base Metals
Vedanta Limited
The de-merger is planned to be a simple vertical split, for every 1 share of Vedanta Limited, the shareholders will additionally receive 1 share of each of the 5 newly listed companies.
In addition to this, the company also noted today’s announcement from Hindustan Zinc Limited (HZL, a subsidiary of Vedanta Limited), whereby their Board announced a comprehensive review of its corporate structure for unlocking potential value and intention to create separate legal entities for undertaking the Zinc & Lead, Silver and Recycling business of HZL, the company said in the regulatory filings.
"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," said Anil Agarwal, Chairman of Vedanta.
Vedanta Limited shares
The shares of Vedanta Limited on Friday at 3:30pm IST closed at Rs 222.65, up by 6.86 percent.