About two months after ITC announced its demerger and separate IPO plan for its hotels business, Indian multinational mining giant Vedanta has made an announcement on similar lines.
According to a?Bloomberg?report, Vedanta has informed its lenders about a?potential demerger of its businesses into multiple listed entities, with the restructuring aiming to alleviate the group's debt burden if successful. It?may announce the plans soon, with businesses like aluminum, oil and gas, and iron and steel being listed separately as four companies. This demerger could assist Vedanta's parent company, Vedanta Resources, in managing its debt, while Vedanta Resources will continue to serve as the holding company for the new units.
69-year-old billionaire Anil Agarwal, also known as metal king, is the founder and chairman of Vedanta's parent company Resources Limited.??
The demerger and IPO listing move will need shareholder and other regulatory approvals and the process could take two to three months, the source said, as per Reuters report.?Vedanta?is reportedly separating its commodities businesses into four companies to get better valuations.
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Vedanta¡¯s shares are trading more than 1% higher today after the company announced the big restructuring plan. However, it has otherwise been a bloodbath, with its shares being down more than 30% this year to date.?
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This?demerger?could assist Vedanta's parent company, Vedanta Resources, in managing its debt, while Vedanta Resources will continue to serve as the holding company for the new units.?Moody's has recently downgraded Vedanta Resources' ratings from Caa1 to Caa2 due to an elevated risk of debt restructuring. Resolving this debt issue has been a priority for years for Agarwal¡¯s indebted Vedanta Resources, but a global increase in borrowing costs has raised the stakes, with about $2 billion of bonds due to be redeemed next year. In August, Agarwal floated a plan to separate out some of its businesses but had not provided details, as per ET.
Among the potential hurdles ahead is the group¡¯s use of its own stock in Vedanta Ltd. and in key cash-generating unit Hindustan Zinc to secure debt. According to stock exchange data, it has pledged virtually all of its majority holding in both companies.
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