InvestorQ : Why is Vedanta planning to split its businesses into 3 different companies?
Niti Shenoi made post

Why is Vedanta planning to split its businesses into 3 different companies?

ishika Banerjee answered.
10 months ago

If Anil Agarwal has his way, then he would like to split Vedanta into 3 separate listed entities with a separate business focus for each. While the broad intent is to restructure the business in order to deliver extra value to shareholders, the specifics appear to be gravitating towards a demerger plan. Agarwal, for one, believes that the Vedanta group has a Hindalco, JSW Steel and an Exxon that is sitting inside the group.

This will be a reverse of the traditional SOTP argument wherein the parts are estimated to be worth a lot more than the whole. For this, Vedanta is likely to look at hiving off its aluminium business, oil & gas business and Iron & steel business into 3 separate entities. Vedanta will still retain its stake in Balco, Hindustan Zinc and chrome business in the holding entity. Existing shareholders of Vedanta will be get shares in each of the 3 companies.

Inorganic acquisitions are nothing new to Vedanta. They have acquired and integrated Balco, Hindustan Zinc, Sesa Goa, Cairn India, Electrosteel and Madras Aluminium. Now, Vedanta is looking to separate these companies to deliver better shareholder value. That way, capital intensive businesses will get demarcated from the capital light businesses so ROI can be properly demarcated. Its last attempt at delisting was rejected by LIC.