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energy | IST

Vedanta considers listing businesses separately; constitutes committee to look at value unlocking measures

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Vedanta board has constituted a committee of directors to evaluate and look for demerger, spin-off, strategic partnerships etc for value unlocking and simplification of corporate structure.

Billionaire Anil Agarwal's Vedanta Ltd is considering restructuring its business and has constituted a committee to look at ways to unlock value via this exercise. In other words, the aluminium, iron and steel, and oil and gas businesses are likely to be housed in standalone listed entities.
"All the three businesses have great potential for growth and we think the model being evaluated will provide natural avenues for growth as well as enhance shareholder value," said Anil Agarwal.
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The mining behemoth's board has constituted a committee of directors to evaluate and recommend such options and alternatives at the earliest.
"The idea is to do it as early as possible. I can't give a timeframe but it will be very soon," Agarwal said.
The appointed committee will be looking for demerger, spin-off, strategic partnerships etc for value unlocking and simplification of corporate structure.
What is the read-through?
- No mention of zinc and copper business
It is interesting that there is no mention of Zinc International and the copper business in the press release. The copper business (Tuticorin) has been shut for the past few years.
What has management hinted?
In Q2FY22 Vedanta management had hinted at the possibility of divesting Zinc International to Hindustan Zinc.
Key reasons
Analysts say that Vedanta is looking at ways to increase cash flows to parent Vedanta Resources. It is currently dividend pass-through is less efficient as HZL pays Vedanta and then to shareholders.
It is believed that a better way would be to get the cash in Vedanta books and then pay it out to shareholders. Alternatively, if Vedanta has cash then they can do a buyback with which promoter holding will improve.
How do the numbers stack up?
EBITDA contribution (Q2FY22)
BusinessDivision
Aluminium44%
Zinc India31%
Oil & Gas13%
Iron Ore5%
Zinc – Intl3%
Power3%
FACOR1%
Steel1%
The restructuring would also tailor the capital structure and capital allocation policies based on business-specific dynamics, create distinct investment profiles to attract deeper and broader investor bases; and accelerate emissions reduction and strong ESG practices. Agarwal said the Board has appointed various advisors to assist in evaluating the options.
(With PTI inputs)