BIZ DESK
Vedanta Biz Restructuring: Vedanta Limited has approved the demerger of its diversified business into six ‘separate’ listed companies, in a move to unlock value for its shareholders. The six independent listed entities consist of Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta base metals and Vedanta Ltd.
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.
Vedanta has a unique portfolio of assets among Indian and global companies with metals and minerals – zinc, silver, lead, aluminium, chromium, copper, nickel; oil and gas; a traditional ferrous vertical including iron ore and steel; and power, including coal and renewable energy; and is now foraying into manufacturing of semiconductors and display glass. 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
Details of each of the six listed entities:
Vedanta Aluminium: The Company’s Jharsuguda facility is the largest single-location aluminium smelting facility outside of China, and recently saw its capacity ramp up to 1.8 MTPA. It is accompanied by Bharat Aluminium Company Ltd. (BALCO – a 51 per cent owned subsidiary of Vedanta Limited, taking the total group capacity to 2.4 MTPA)
Vedanta Power: Vedanta Power is one of the largest private independent power players in India and backed by one of the world’s fastest growing power markets and a favourable political climate.
Vedanta Base Metals: The proposed Vedanta Base Metals unit will contain a mix of strong international base metal production assets, growth projects and downstream businesses that feed directly into the supply chain for metals critical to global energy transition.
Vedanta Oil & Gas: Vedanta’s oil & gas is the largest private oil, gas and sweet crude exploration and production company in India, accounting for more than a quarter of India’s domestic crude oil production.
Vedanta Steel & Ferrous: Vedanta’s Iron Ore Business includes Iron Ore Goa, Iron Ore Karnataka, Liberia as well as VAB (Value Added Business). The company has aspirations to more than double annual iron ore production, from assets in India and Liberia to 13MT by 2025.
Vedanta Ltd: The currently listed entity will house the manufacturing of LCD and display glass, the semiconductor business, the stainless business and the stake in Hindustan Zinc.
Rationale for Demerger:
- Simplifies Vedanta’s corporate structure with sector focussed independent businesses.
- Provides opportunities to global investors, including sovereign wealth funds, retail
investors and strategic investors, with direct investment opportunities in dedicated
pure-play companies linked to India’s remarkable growth story through Vedanta’s
world class assets. - With listed equity and self-driven management teams, these demergers provide a
platform for individual units to pursue strategic agendas more freely and better align
with customers, investment cycles and end markets. - Enables to better highlight, and for the market to more easily value, the remarkable
technological advances, environmental stewardship and robust growth stories within
Vedanta’s family of companies.
Anil Agarwal, Chairman of Vedanta, stated:
“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. Vedanta is also foraying into semiconductors and display glass
which are of great strategic significance to India.
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.”
Vedanta values remain embedded in the new entities
Vedanta Limited ranks 6th among 216 global metal and mining companies in the S&P Global
Corporate Sustainability Assessment 2022. The Company aims to ensure that Vedanta DNA
and focus on ESG transformation remain embedded post the unbundling exercise. These
include:
• The new companies will remain committed to achieving net-zero carbon emissions by
2050 and net water positivity by 2030 with the aims to spend $5 billion over the next
10 years to accelerate this transition. In the process of transitioning to net zero we
already secured 1.8 GW of Renewable Energy through power delivery agreement
across our group companies.
• Vedanta’s digital-first approach and keen focus on advanced technologies has resulted
in improved processes, strengthened cybersecurity, and easy access to information for
effective decision making. Each of Vedanta’s businesses has embarked on its own
transformational journey towards digitalisation and innovation and these will
continue.