How will Vedanta's demerger affect your shares?

Demerger is planned to be a simple vertical split

vedanta-reuters Representative image | Reuters

Vedanta Ltd, on Friday, announced that it is planning to split its metals, power, aluminum, and oil and gas businesses into separate listed entities and overhaul its zinc unit as part of value creation and reducing debt load.

The exercise will require the approval of shareholders and lenders and is expected to be completed by FY25.

Vedanta chairman Anil Agarwal had, last month, said demerger and separate listing of some businesses was being considered to unlock shareholder value.

On Friday, the board of Vedanta Ltd approved the "demerger of business units into independent 'pure play' companies to unlock value and attract big-ticket investment into expansion and growth of each" of them.

The board approved six separate listed companies - Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Limited.

Vedanta, in a statement, said the move will simplify corporate structure with sector-focused independent businesses as well as provide opportunities to global investors, including sovereign wealth funds, retail investors and strategic investors, with direct investment opportunities in dedicated pure-play companies.

The company said it 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 independent management, capital allocation and niche strategies for growth. It will also give global and Indian investors the potential to invest in their preferred vertical, broadening the investor base for Vedanta assets," it said.

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, the company said.

How will it affect you?

If you own shares of Vedanta, you will get one share of each of the newly listed entities for every share being held. "The demerger 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 five newly listed companies," the company said in the statement.

Vedanta Aluminum is India's largest producer of aluminum and value-added aluminum products, including rods, billets, and rolled products.

Vedanta Power is one of India's largest private-sector power generators. The company calls it a "super critical asset." Vedanta Power has an overall portfolio of 9 GW in India out of which 37 per cent is used for commercial purposes

Vedanta Oil & Gas contributes over 25 per cent of India’s annual production of oil and gas

Vedanta Steel and Ferrous Materials will have an iron ore business, Western Cluster Limited and ESL Steel Limited.

Vedanta Ltd will house the manufacturing of LCD and display glass, the semiconductor business, the stainless business and the stake in Hindustan Zinc, according to CNBCTV18.

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