Vedanta’s demerger plans may face hurdles from shareholders: Credit Sights report

“We maintain our view that VEDL’s (Vedanta Ltd’s) planned demerger of its other businesses could face major hurdles from minority shareholders and/or creditors, which may delay or derail the deal. There have been few updates on the demerger progress ever since it was announced in September 2023,” said the Credit Sights report.

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In September 2023, the mining conglomerate had announced its demerger plans for its five key businesses, including aluminium, oil and gas, and steel. 

“In the first place, we felt that a demerger of VEDL will not fundamentally and significantly address VRL’s (Vedanta Resources Ltd) ability to service its debt obligations, and will in fact complicate VRL’s corporate structure, something the company has spent a decade simplifying,” the report also said. “We acknowledge the demerger could improve VEDL’s overall equity fundraising ability and valuations and simplify price discovery. We are cognisant that cash leakage via dividend upstreaming is still unchanged, and there is still a lack of clarity of how VEDL’s share pledge on the January 2027 and December 2028 bonds will be after the demerger and on how assets and debt liabilities will be apportioned among the various business units.”

ALSO READ: Vedanta Resources to deleverage debt by $3 billion over three years

For Vedanta Group company Hindustan Zinc Ltd (HZL) it will be a challenge to proceed with the proposed demerger as the company will be “unsuccessful” in getting the required 75 per cent shareholders’ approval, said the report.

Vedanta and the Centre, which owns a 29.5 per cent stake in Hindustan Zinc, have been at loggerheads on a couple of matters related to Hindustan Zinc in the past year, it mentioned. 

Vedanta Resources Ltd owns 68.11 per cent stake in its Indian subsidiary Vedanta Ltd.

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Published: 14 Mar 2024, 05:19 PM IST