Vedanta’s strategic restructuring and corporate history; Company to demerge into six separate listed entities

Vedanta Limited, India’s largest diversified natural resources company with a significant global presence, has announced its plan to demerge its business units into independent ‘pure play’ companies to unlock value and attract substantial investment for the expansion and growth of each business.

Vedanta possesses a unique portfolio of assets compared to both Indian and global companies, encompassing metals and minerals such as zinc, silver, lead, aluminium, chromium, copper, and nickel; oil and gas; a traditional ferrous vertical including iron ore and steel; and power, which includes coal and renewable energy. Additionally, the company is venturing into the manufacturing of semiconductors and display glass.

Once the demerger is completed, each independent entity will have the freedom to unlock its full potential and realize its true value through independent management, capital allocation, and niche growth strategies.

Vedanta Limited will divide its business into six separate listed companies based on their respective industries. These five companies will be named Vedanta Aluminium, Vedanta Oil and Gas, Vedanta Power, Vedanta Steel, and Vedanta Base Metals. The remaining business, primarily related to Hindustan Zinc, will remain with Vedanta Limited.

Following this, the shareholders will now get one share of each of the newly listed entities for every share of the currently listed Vedanta Limited that they hold.

Pending approval from the board, stock exchanges, and the NCLT, this process is expected to take an additional 12 to 15 months.

Here are Vedanta’s historical corporate actions since 2007: 

In 2007, Vedanta Resources acquired a 51% stake in Sesa Goa from Mitsui & Co for USD 981 million, valuing the iron ore-mining firm at Rs 2,036 per share.

In 2011, Vedanta group company Sesa Goa, with its subsidiary Sesa Resources, purchased approximately a 1.5% stake in Cairn India for over Rs 936 crore, increasing its total ownership in the oil producer to 20%.

In 2011, Vedanta acquired a 58.5% stake in Cairn India for USD 8.67 billion (approximately Rs 44,910 crore), marking its entry into the hydrocarbon business.

In 2012, Vedanta Resources announced the merger of its Indian firms, Sesa Goa and Sterlite Industries, into a single entity called Sesa Sterlite.

In 2017, Cairn India merged with Vedanta Limited to consolidate its position as one of the largest diversified natural resources companies in the world.

In 2020 (May), the Company attempted to delist shares from the Indian market but received a lukewarm response from minority investors. In May 2020, the promoters of Vedanta announced a delisting offer at Rs 87.5 per share.

In 2020 (October), the company’s delisting attempt failed because there were fewer stocks tendered by the public shareholders than the minimum number of shares required to be accepted by the acquirers for the delisting offer to be successful.

In 2022, it announced a capital allocation policy that aligns with a consistent, disciplined, and balanced approach to capital allocation, with a primary emphasis on long-term balance sheet management with a prime focus on organic growth.

In 2023 restructuring into six separate entities including Vedanta Limited.

Furthermore, the vedanta stock price during the same period rallied from Rs 126.20 per share on September 28, 2007, to Rs 222.55 per share. These stock prices include dividend adjustments.

Following this news today, the stock price surged by 5%, and as of writing this article, it is trading at Rs 232 per share on the BSE.

The current market capitalization of the company stands at Rs 86,238 crore, and the stock has generated a negative return of 14% within a year and 70% over the last three years.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.