Vedanta: Vedanta plans to spin off, list 5 entities as $2billion debt looms

MUMBAI: In a sweeping overhaul of his commodities conglomerate amid a looming $2-billion debt bill, billionaire Anil Agarwal plans to spin off five businesses – aluminium, power, oil & gas, steel & iron ore and copper & zinc – from the Rs 68,000-crore Vedanta into separate listed entities. For every share of Vedanta, shareholders will receive one share of each of the five newly listed companies.
Agarwal hopes the split will fetch higher valuations as the present structure loses attraction among Indian and foreign investors. According to Vedanta, the move would “open multiple doors” as the five separate entities can attract “big ticket investments”, which may help the group reduce liabilities. London-based Vedanta Resources (VRL), which owns 64% of BSE-listed Vedanta, has $1 billion in bonds maturing each in January 2024 and August 2024.

With the restructuring, Agarwal will have eight listed entities in the country, including Hindustan Zinc, in which Vedanta holds a 65% stake, and Sterlite Technologies, where he and his family own 54%.
On September 26, Moody’s downgraded the “corporate family rating” of VRL, citing “elevated risk” of debt restructuring in the coming months. In August, VRL had raised $500 million by selling a 4.3% stake in Vedanta to stave off some pressure arising from its imminent cash needs. But with its remaining shareholding in Vedanta as well as Vedanta’s entire shareholding in Hindustan Zinc, which holds around two-thirds of the group’s consolidated cash, already being pledged, it has “limited financial flexibility to raise financing”, said Moody’s.
Vedanta’s move has drawn flak from a proxy advisory firm. “Just a few years ago, Vedanta merged Sterlite and Sesa Goa and thereafter Cairn Energy, giving such arguments that it is in shareholders’ interest to merge these cyclical businesses. Also, the merger ratios were favouring promoters and not minority shareholders of merging companies… The same board is now reversing its own business case with no apparent reason,” said Anil Singhvi, founder of advisory firm Ican Investment.
Agarwal’s latest move comes two years after he scrapped a similar restructuring plan, saying the conglomerate structure was “optimal”.