Markets pound Sterlite after demerger plan

Font Size

Print

Feedback

Email

Discuss

Related Articles

Bharti offers MTN $13.1 bn in cashBharti, MTN extend merger talks again

Mumbai, Sep 9 : Vedanta Resources Plc on Tuesday announced that it had restructured its corporate group into three commodity-focused verticals: copper & zinc-lead (Sterlite Industries), aluminium & energy (VAL and Sterlite Aluminium) and iron ore (Sesa Goa). The move aims to simplify the corporate structure, ensure clear allocation of opportunities and reduce conflict of interest among companies, Vedanta said.

Under the new structure, effective April 1, Sterlite will demerge its aluminium and energy business to Malco (to be renamed Sterlite Aluminium) and Vedanta will transfer its 79.4% equity interest in Konkola Copper Mines to Sterlite. Sterlite shareholders will get seven Malco shares for every four Sterlite shares held, whereas investors in Malco will get one Sterlite share for every 51 Malco shares held.

Addressing a press meet, Vedanta Group chairman Anil Agarwal said, “We expect the scheme to be completed by March 2009. This restructuring will unlock value for all shareholders of Vedanta.”

If successful in its bid for Asarco, the US firm will also be included under Sterlite. “Looking at the response of workers and creditors, we are hopeful that by the end of this year, we will be able to acquire Asarco,” Agarwal said.

Sterlite Industries shares on the BSE were down 7.5% to close at Rs 575.70 on Tuesday following concerns that the Malco demerger could hit the company’s profitability.

“The group restructuring plan announced by Vedanta is positive for shareholders. Greater clarity and transparency with respect to business structures have always aided better valuations, as both human and financial resources can be channelled more effectively, thus leading to improved performance,” said Hitesh Agrawal, research head, Angel Broking.

Meanwhile, the company has also announced a $9.8-billion aluminium capex programme, under which it plans to raise smelting capacity by 2.6 million tonne per annum by 2012 and become the world’s fifth-largest aluminium producer.

The company will generate $4 billion in profit every year after the expansion is completed by 2012.