Unlocking Hidden Value
The plan to split into five listed entities has been approved by the National Company Law Tribunal, and the company is targeting completion by March 2026. The oil-to-metals group will emerge as five independently listed, pure-play companies, including Vedanta Aluminium, Talwandi Sabo Power, Vedanta Steel and Iron, and Malco Energy.
Benefits for Shareholders
Shareholders will receive one equity share of each demerged entity for every share they currently hold in Vedanta. This move is expected to unlock the growth potential of businesses spanning zinc, aluminium, oil and gas, power, iron ore, and steel. With each resulting company having an independent board and professional management, the breakup is likely to bring more focus and efficiency to each business.
Debt, Dividends, and Governance
The Rs 48,000 crore debt on Vedanta's books will be allocated to the demerged entities based on their respective cash flows. Each company will have an independent board and professional management, with promoters holding around 50% through a holding structure but not involved in day-to-day operations. The company has also committed to regular payouts, with the chairman stating that "dividend is in my blood – there will always be dividends".
What to Expect
As the January hearing approaches and asset transfers get under way, investors are weighing whether Vedanta's sweeping breakup can deliver on its promise. With the company's parent-level leverage remaining comfortable, and potential upside from aluminium London Metal Exchange prices, volume growth, lower costs, and the demerger itself, the future looks promising for Vedanta's shareholders.
Remember, this is a perspective, not a prediction. It's essential to do your own research and consider multiple viewpoints before making any investment decisions.
Key Takeaways
- Vedanta Ltd's plan to split into five pure-play companies is moving closer to reality
- The company is targeting completion by March 2026
- Shareholders will receive one equity share of each demerged entity for every share they currently hold in Vedanta
- Each resulting company will have an independent board and professional management
- The company has committed to regular payouts and aggressive capital expenditure