In order to boost valuations, Anil Agarwal launched a massive consolidation at the metals-to-crude India business of his firm under Vedanta Ltd. ten years ago. Now, he wants to erase a lot of that in order to recover value amid debt problems. In 2012–2013, Agarwal consolidated the oil and gas unit—then Cairn India—as a division of Vedanta and combined the iron ore companies Sesa and Sterlite. In order to streamline the group structure and increase value, it further aligned certain of its subsidiaries. Additionally, it was intended to reduce cyclicality and increase variety.
When asked about the difference between a diversified company and a pure play at the time, Mr. Agarwal responded, “Diversified offers 30%–40% higher value. Therefore, it was streamlining the procedure while increasing value for stockholders.
Vedanta Resources, formerly a company traded on the London Stock Exchange as Sesa Sterlite, changed its name to Vedanta in 2015. A year after Vedanta Resources combined Sesa Goa, Sterlite Industries, Madras Aluminium Co, Sterlite Energy, and Vedanta Aluminium into Sesa Sterlite, the company decided to alter its name.
A few years later, Vedanta incorporated all of its operations into the main organization, after making fruitless attempts to turn it into a private corporation.
Returning to Vedanta’s demerger proposal, it is stated in a regulatory filing that there would be a straightforward vertical split and that shareholders would furthermore receive one share from each of the five newly listed businesses for every Vedanta share.
Reasons for Vedanta’s Decline
I had tried to Explain in a plain language
- The payment of the Vedanta Bond is due in January 2024.
- Two more Bonds will become due in August 2024 and March 2025.
- Total amount owed for bond repayment, including loans
2024: $2.7Bn
2025: $3.6Bn
Due in full: Rs. 53000 Cr.
Vedanta is still working out how to pay this back. To arrange funding, company representatives are engaging with investors from Singapore and Hong Kong.
Rating agencies have downgraded Vedanta in international markets in the midst of these developments.
Worries are increased by the fact that existing foreign bonds are currently trading below their issue price.
The main problem is that Agarwal and Vedanta plc are drowning in debt, and not just any debt—very expensive debt, with interest rates as high as 12.75% on USD bonds!—reflecting their junk grade credit status. All of these maneuvers are designed to help Agarwal steal money from the Indian running companies in order to settle his obligation to foreign creditors. Take a look at the outrageous “brand fee” Vedanta companies paid for the right to use the Vedanta name! In actuality, the operating companies ought to be compensated for the harm caused by affiliation. At its most extreme, asset and income stripping.
Our Opinion: Vedanta and its owner Mr. Anil Agarwal have the financial means to pay off these debts, but prompt action is required to maintain the assets’ good value so they can continue to be used.
Vedanta will continue to serve as an incubator for start-up companies, particularly those in its technology verticals, supported by the robust financial returns from the assets of its subsidiary Hindustan Zinc.
“The company (Vedanta) will give investors the chance to invest in some of the top zinc production assets in the world with a clear capital allocation policy while profiting from these emerging technology companies until they are also prepared to be released as independent, significant global businesses. These include Vedanta’s investments in stainless steel (ferrochrome and nickel) and semiconductors and displays (providing exposure to India’s rapidly expanding US$140 billion electronics sector), according to the statement.
Vedanta claims to have finalized a technical agreement for semiconductor manufacturing as well as a partnership for display manufacturing with Taiwanese company Innolux.
Big Value Unlocking for Anil Agarwal’s Vedanta Group
Vedanta decides to Demerger its Business into 6 Different Listed Companies
1⃣ Vedanta Aluminium – The largest producer of aluminum goods in India, Vedanta Aluminium serves a variety of industries including construction, solar, electric vehicles, aviation, and aerospace. One of the world’s top producers of aluminum, the “Metal of the Future,” is Vedanta Aluminium, a division of Vedanta Limited. In addition, with operations in the states of Odisha and Chhattisgarh, we are India’s largest producer of aluminum.
In a wide range of critical industries, including aerospace, aviation, electrical, transportation, infrastructure, consumer goods, and more, as well as emerging industries like electric vehicles and renewable energy, aluminum’s special properties find applications. As a result, it is essential for modern life and essential for a low-carbon future. Therefore, it should come as no surprise that aluminum is currently the second most significant metal in the world and is on track to overtake gold as the most significant commercial metal soon.
2⃣ Vedanta Oil & Gas – As the largest private sector crude oil producer in India, Vedanta Limited’s Oil & Gas operations include the assets of Cairn, which provide over 26% of India’s yearly production. The largest privately owned producer of crude oil in India is Cairn Oil & Gas. It has been in operation for more than 20 years and is in a good position to lessen the burden of the nation’s energy imports. India’s oil and gas resources are being actively developed by Cairn.
3⃣ Vedanta Power – One of India’s largest private sector power producers and a very important asset is Vedanta Power.
The company does business through a wholly owned subsidiary called Talwandi Sabo Power Limited (TSPL). The Punjab State Electricity Board (PSEB) and TSPL have a power purchase agreement in place for the establishment of a 1980 MW thermal coal power station with three units of 660 MW each. To supply electricity and light every home in the state, TSPL generates and supplies 100% of the power to the PSEB. 37% of Vedanta Power’s 9 GW total portfolio in India is utilised for commercial activities. We have long-term power purchase agreements with state distribution firms in Tamil Nadu, Kerala, Chhattisgarh, and Odisha in addition to Punjab to facilitate power for commercial use.
4⃣ Vedanta Steel & Ferrous Materials – Presenting the world’s largest range of premium metals and value-added products under one roof. The entire bouquet of Vedanta’s premium offerings in metals, both ferrous & non-ferrous, under one roof to transform your metal buying experience forever. Vedanta Limited is India’s largest producer of Aluminium, Zinc, Lead and Silver, and leading producer of Iron & Steel and Copper. It will be India’s largest private sector exporter of Iron ore including Sesa Iron Ore, Sesa Coke, WCL (Liberia) and a 95.95 percent stake in Electrosteel Steel.
5⃣ Vedanta Base Metals will have a diversified portfolio of international base metal assets including ones in Tuticorin, Fujairah Gold, Silvassa and VZL.
6⃣ Vedanta Limited – The company primary focus will be on manufacturing of LCD and Display Glass, further streamlining it resources into sunrise industries like semiconductor and green hydrogen. And last but not the least its primary stainless business and goldmine stake in Hindustan Zinc.
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