Mumbai: Vedanta Ltd., a prominent mining conglomerate, is progressing with plans to demerge its key operations, including aluminium, into separate listed entities and allocate debt among them based on their assets, according to sources.
The company is reportedly in advanced discussions with its lenders regarding the demerger, which has been proceeding smoothly. Debt distribution following the demerger will be based on the assets allocated to each demerged entity, as per regulatory guidelines.
A senior company official explained at a recent investor event that the debt will be divided among the demerged entities in proportion to their asset book value. This approach aims to make the transaction tax-neutral.
Last September, Vedanta announced its intention to demerge its metals, power, aluminium, and oil and gas operations to unlock value. Following the demerger, Vedanta Aluminium, Oil & Gas, Power, Steel and Ferrous Materials, Base Metals, and Limited will operate as separate verticals.
Under the demerger plan, Vedanta shareholders will receive one share of each of the five newly listed businesses for each share they currently hold. Hindustan Zinc and electronics will remain with Vedanta Limited post-demerger. The demerger application will be submitted to the National Company Law Tribunal (NCLT) immediately after obtaining No Objection Certificates (NOCs).
SBICAPs is representing lenders in the debt allocation process and expects to receive NOCs soon. In addition to the demerger, Vedanta aims to reduce its net debt below $9 billion by deleveraging $3 billion over three years. The company plans to fund this deleveraging through strong internal cash flows, strategic asset sales, and potential equity partnerships.
The demerger is expected to streamline Vedanta’s corporate structure, creating sector-focused autonomous businesses. The company aims to create a corporate structure that emphasizes asset ownership and entrepreneurship, allowing each company to chart its own course.
After the demerger, global investors, including sovereign wealth funds, retail investors, and strategic investors, will be able to directly invest in these pure-play companies. Vedanta believes that the demerger will enable each company to pursue its strategic agenda more effectively and enhance its connection with customers, investment cycles, and end markets.
