Vedanta to spin off four commodity companies: Report

The company will spin off its metals, power, aluminium and oil and gas businesses, with an official announcement likely to come this week, the source said.

Vedanta Resources, which has a debt load of $7.7 billion, has been struggling to raise funds due to rating downgrades and concerns about meeting its debt obligations. (Image credit: Reuters)

Vedanta Ltd will separate its commodities businesses into four companies to get better valuations, a source with direct knowledge of the move told Reuters on Thursday. The company will spin off its metals, power, aluminium and oil and gas businesses, with an official announcement likely to come this week, the source said. The move will need shareholder and other regulatory approvals and the process could take two to three months, the source said, declining to be named as they are not authorised to speak to the media.

Vedanta did not immediately respond to a Reuters' request seeking comments.

The company was valued at 776.29 billion rupees ($9.33 billion) as of Wednesday, down by about a third so far this year. Its shares climbed 1.2 per cent on Thursday morning following the reports of a split.

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Chairman Anil Agarwal said last month that Vedanta will consider separately listing all or some of its businesses, in contrast to a failed attempt in 2020 to delist the company to speed up the process of simplifying its corporate structure. Vedanta Resources, the UK-based parent of Vedanta Ltd, should be bringing in equity investors, instead of the debt-swap moves they have been doing, due to its debt repayment issues, said Deven Choksey, managing director of KRChoksey Shares and Securities.

Vedanta Resources, which has a debt load of $7.7 billion, has been struggling to raise funds due to rating downgrades and concerns about meeting its debt obligations. Furthermore, Choksey said, Vedanta Resources has limited ability to demerge other units, given the charge of creditors on cash-generating assets, particularly Hindustan Zinc.

Earlier this year, Agarwal sought to trim down the group's debt by getting Hindustan Zinc, a unit of Vedanta Ltd, to buy some of the parent group's zinc assets in a $2.98 billion deal. However, the Indian government, which owns nearly 30 per cent stake in Hindustan Zinc, opposed the move. On Wednesday, Bloomberg News reported Vedanta Ltd is nearing a deal to spin off its businesses into several listed entities as part of a broader restructuring plan.

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