Vedanta Ltd. is gearing up to separate its various businesses into distinct listed entities. This restructuring endeavor, if successful, could prove instrumental in alleviating the debt burden of tycoon Anil Agarwal’s expansive metals-to-energy empire. Insiders familiar with the matter revealed that the company has apprised its lenders of this intended restructuring, with an official announcement expected in the coming days. The segregated businesses will encompass aluminum, oil and gas, iron ore, and steel, although the sources spoke on condition of anonymity due to the confidential nature of the information.
It’s worth noting that Vedanta Ltd.’s parent company, Vedanta Resources, will retain its status as the holding entity. However, it’s important to emphasize that deliberations are still in progress, and no final decisions regarding the structure or timing of the demerger have been solidified.
Resolving the intricate corporate architecture has been a long-standing priority for Agarwal’s indebted Vedanta Resources. However, a global surge in borrowing costs has elevated the stakes, especially with approximately $2 billion in bonds slated for redemption next year. In August, Agarwal hinted at a plan to segregate some of the businesses but refrained from providing specific details.
One potential obstacle lies in the group’s utilization of its own stock in Vedanta Ltd. and the vital cash-generating unit, Hindustan Zinc, as collateral for debt. Stock exchange data reveals that it has virtually pledged its majority holding in both companies.
Deven Choksey, the Managing Director of brokerage firm KRChoksey Shares & Securities Pvt. in Mumbai, remarked, “Vedanta Ltd. faces constraints in demerging other units due to creditors’ claims on cash-generating assets, particularly Hindustan Zinc.” He further emphasized that despite this challenge, Vedanta would be prudent to tap into the growing interest of global equity investors in India.
Vedanta’s debt continues to exert pressure, with the group’s August 2024 and March 2025 bonds trading below 75 cents on the dollar, a level typically indicative of distress. Moody’s Investors Service recently downgraded the parent company’s ratings further into junk status, citing an escalated risk of debt restructuring in the coming months.
On Thursday, shares in Vedanta Ltd. saw an upswing of up to 2% in Mumbai trading, marking the most substantial increase since September 14. Nevertheless, it’s worth noting that the stock has witnessed a roughly 20% decline over the past year. In contrast, Hindustan Zinc shares experienced a slight dip of about 0.6%.
A more streamlined structure could also empower Agarwal to divest unprofitable or slow-growth assets, a move the billionaire has historically sidestepped. Simultaneously, it offers investors an opportunity to capitalize on the company’s burgeoning ventures, particularly in semiconductors and display glass.
About Vedanta:
Vedanta Limited, an Indian multinational mining company, has its headquarters in Mumbai, India. The company primarily operates in iron ore, gold, and aluminium mines located in Goa, Karnataka, Rajasthan, and Odisha.
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