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Vedanta Ltd, controlled by metal and mining mogul Anil Agarwal, is reportedly closing a deal to demerge its businesses into several listed entities. The company has informed its lenders of the restructuring and could announce the plans in the coming days, Bloomberg News reported on Thursday.
The company is expected to demerge its metals, power, aluminium, and oil and gas businesses and an official announcement is likely this week. As per the report, the broad restructuring, if successful, may help Agarwal manage his group’s debt load.
The move will need shareholder and other regulatory approvals and the process could take two to three months, a source quoted in the report said.
Vedanta Ltd.’s parent firm, Vedanta Resources, will remain the holding company. Discussions are on regarding the structure or timing of the de-merger, as per the report.
Last month, Agarwal had said Vedanta will consider separately listing all or some of its businesses, in contrast to his failed attempt in 2020 to delist Vedanta to speed up the process of simplifying its corporate structure.
In a video message to shareholders in August, Agarwal said the company has a diversified presence in oil and gas, metals and mining, and a separate listing of different businesses will help them grow many folds.
“I have asked all my advisors and my people can we have all products (businesses that Vedanta operates) or some products to be independent,” Agarwal said in a video message posted on YouTube.
He further said: “If you have one share of Vedanta Ltd, you will have many shares of other companies and people will have an opportunity to invest in different areas. Some international companies want to invest in a particular area, they will get that opportunity.”
“Vedanta, in last two decades, has gone into the business which is more and more import substitute; very difficult for the entry into these areas. We have the business of oil and gas, the largest producer of aluminum, completely integrated power, copper, zinc, silver, lead, iron and steel, nickel, ferroalloys, semiconductor, display glass and more,” he said.
In November 2021, Agarwal had first spoken about a possible rejig of the corporate structure through demergers, spin-offs, and strategic partnerships. He said that the move was being considered in a bid to simplify and streamline the corporate structure, unlock value for all stakeholders, and create businesses that are positioned better to capitalise on their distinct market positions and deliver long-term growth and enable strategic partnerships.
On Tuesday, Ratings agency Moody’s Investors Service downgraded Vedanta Resources’ corporate family rating (CFR) from Caa1 to Caa2 due to elevated risk of debt restructuring over the next few months. Moody’s maintained the negative outlooks about the company.
The downgrade is in view to take cognizance of the increased risk around the company’s upcoming debt repayments. The rating agency has also warned of a further downgrade if the company is unable to make progress on funding arrangements.
“The downgrade reflects the elevated risk of debt restructuring over the next few months because VRL has not made any meaningful progress on refinancing its upcoming debt maturities, in particular the $1 billion bonds maturing each in January 2024 and August 2024,” says Kaustubh Chaubal, a Moody’s Senior Vice President and lead analyst on VRL.
Following this, Vedanta shares fell over 6 per cent to hit its fresh 52-week low of Rs 210 on Wednesday.
On Thursday, shares of Vedanta Ltd were trading at Rs 211.65, up by 1.29 per cent, at 9.50 AM.
It is to be noted that Vedanta Resources faces repayment of notes worth nearly $2 billion in the financial year 2025. Including these bonds, the company is facing debt repayment worth $3.6 billion in the next financial year, as per Kotak Institutional Equities. As of March 2023, Vedanta’s debt/EBITDA stood at 3.7 times.
Also read: Moody’s downgrades Vedanta Resources’ ratings from Caa1 to Caa2 due to elevated risk of debt restructuring
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