Anil Agarwal has said that Vedanta split will be appealed by the end of March
New Delhi:
Metals and mining group Vedanta Ltd will announce the outline of a proposal to split key companies into separate publicly traded companies by the end of March, chairman Anil Agarwal said, as he strives to simplify and streamline corporate structure to create value.
While the zinc business has already been transferred to a publicly traded subsidiary, the intention is to separate the aluminum, iron and steel and oil and gas businesses into standalone listed entities.
This will unlock value for all stakeholders and create companies that are better positioned to capitalize on their distinct market positions and achieve long-term growth and enable strategic partnerships, he said in an interview.
It will also help align capital structure and capital allocation policies based on company-specific dynamics and create distinctive investment profiles to attract deeper and broader investors.
“It (spin off) is a natural thing to do. The market is very good and production (at different divisions of Vedanta) is going well. And so we think having separate companies will create appreciation,” he said.
“I think maybe in a month and a half, sometime before the end of March, we’ll announce the full (outlines).” Mumbai-listed Vedanta Ltd had announced in November last year that its board of directors had formed a subcommittee to evaluate a potential spin-off of its aluminum, iron and steel and oil and gas businesses into separate publicly traded companies. .
Following the subcommittee review, the board of directors may also consider other alternatives, such as strategic partnerships that can unlock value in the companies for its shareholders.
The spin-off will result in three new listed entities with an equity stake equal to that of Vedanta Ltd.
Following this, the London-based parent company Vedanta Resources will consist of five publicly traded entities. Four of them – Vedanta Ltd and the three newly listed companies – will hold the same shares. The group’s listed zinc subsidiary, Hindustan Zinc Limited (HZL), will remain 64.9 percent owned by Vedanta Ltd.
The plan under evaluation is the same as what port-to-energy conglomerate Adani Group did in 2015 – creating separate publicly traded entities for electricity, mining, gas and transmission companies.
The group’s oil and gas activities are transferred to Vedanta Ltd through its wholly owned subsidiary Cairn India Holdings Limited (CIHL). While the zinc activities in India are held by HZL, the group also has zinc mining activities in South Africa through Vedanta Ltd’s wholly owned subsidiary Zinc International (ZI).
The aluminum business is managed as a division of Vedanta Ltd and through Vedanta Ltd’s 51 percent subsidiary Bharat Aluminum Company Ltd (BALCO).
Agarwal said the rationale behind a spin-off/strategic partnership is to unlock value for its shareholders and help provide greater transparency in how each company’s cash surplus is spent for reinvestment or dividends.
In the current structure there is no separate explanation of the free cash flow generation by the various business units. Whereas after spin-off each entity will report its separate financial data.
It is expected that Vedanta Ltd’s stand-alone debt will be equitably transferred to the three listed companies.
Asked about the consolidation the group attempted before and has now gone in the completely opposite direction of the split, Mr Agarwal said the buyback was important then, but now it’s “very important that the show must go on.” “We are 1.5 percent of the country’s GDP. We are the top taxpayer and pay Rs 3 lakh crore in taxes. And we believe in India, India and India.
“India must create jobs, India must not import oil and gas, zinc and silver. It is important that we increase our production. And we must create value,” he said.
“The whole idea is to make investors very comfortable. If we look at different silos, production, cost of production, EBITDA, independent governance structure with independent directors … everything will be very, very clear,” he added.
In 2020, the promoters had attempted to delist Vedanta Ltd by buying back shares from the public. But the offering failed because it was unable to obtain the minimum required shares necessary for the delisting.
Currently, the subsidiary has a market capitalization that is larger than the parent company. The market cap of HZL is Rs 1.32 lakh crore while that of Vedanta Ltd is Rs 1.18 lakh crore.
