Five baby Vedantas will step into stock exchanges in May, three to bear most debt load
Mumbai: Five companies arising from the demerger of Vedanta Ltd may list on the stock exchanges as early as May, three of them carrying the parent company’s debt burden of $6.7 billion, company executives said on Thursday.
Billionaire Anil Agarwal-led Vedanta received the much-awaited approval for the mega demerger from the National Company Law Tribunal in December, more than two years after the plan was floated. Vedanta management on Thursday said the demerger will come into effect on April 1 and that the company aims to list shares of the new companies in early May, certainly before the end of June. The comments were made during Vedanta’s quarterly earnings call, where it reported record revenue and profits.
Vedanta will split itself into five independent listed businesses: Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Iron and Steel and Vedanta Ltd itself will house the zinc and silver businesses under subsidiary Hindustan Zinc and act as an incubator for new technology and business opportunities.
Vedanta has not yet finalized which resulting company will take on how much debt; but every company that emerges will get Vedanta’s share ₹Management said there is a net debt of ₹60,624 crore, based on the value of assets and cash generating capabilities, as confirmed by the company’s lenders.
“Overall, Vedanta’s net debt of approximately $6.7 billion will be apportioned based on the ratio of the assets each entity will carry post-merger (and) the cash generation and debt servicing ability of each entity,” Ajay Goel, chairman and chief financial officer, said during the call.
Goel said that Vedanta Aluminum will take the lion’s share of the company’s debt burden, while some of the debt will go to Vedanta Power. Without disclosing the exact debt breakdown, he said the remaining debt will remain on the books of Vedanta Limited.
Interestingly, Goel said that no debt was distributed to Vedanta Oil and Gas, which will handle the group’s oil exploration and production business after the demerger. Similarly, the group’s ESL Ltd. Vedanta Iron and Steel, which will house its iron ore mines and steel facility, will also assume almost no debt.
“These are slow-growing businesses of Vedanta Group and their balance sheets could not afford high debt. It is better to keep them debt-free and continue their operations. So, I would say this is a positive as all the businesses are divided with healthy balance sheets,” said Amit Lahoti, chief metals and mining analyst at Emkay Institutional Equities.
Record profit in the 3rd quarter
Vedanta reported its best-ever quarterly profit in the December quarter. ₹7,807 crore, up 60% year-on-year.
Quarterly revenue was also at a record high ₹45,899 crore, almost a fifth more than the previous year. Unsurprisingly, earnings before interest, taxes, depreciation and amortization (EBITDA) were also at a record level. ₹15,171 crore, an increase of one-third from last year.
“Q26 was a landmark quarter for Vedanta, delivering our highest ever EBITDA. ₹At ₹15,171 crore, our two businesses achieved their best-ever financial results, managing director Arun Misra said in a statement.
Misra said the aluminum sector reported the strongest EBITDA margin at $1,268 per tonne, supported by record alumina and aluminum production. The zinc and silver business in India, under Hindustan Zinc, also recorded its highest ever quarterly EBITDA. ₹It added 6,064 crore. The silver rally supported Hindustan Zinc’s financials and accounted for 44% of total profits.
“These results, along with the landmark approval to split into five pure operating units, demonstrate our strong operational momentum and our readiness to unlock long-term value as we progress on Vedanta’s 2.0 journey,” Misra said.
