The proposed demerger of Vedanta, which will split the company into five specialised verticals, has run into fresh turbulence after objections from the central government were presented in the National Company Law Tribunal (NCLT) in Mumbai on Wednesday.
Government and SEBI flag concerns
The Ministry of Petroleum and Natural Gas (MPoNG) opposed the restructuring plan, raising concerns about guarantees provided by the company to the government, sources said.
Officials argued that the demerger created uncertainty over the enforceability of these guarantees. According to a report by CNBC, the government also claimed Vedanta had concealed key information regarding the liabilities arising from the demerger, and that the firm has shown inflated revenues.
In addition, a representative of Securities and Exchange Board of India (SEBI) also confirmed to the tribunal on Wednesday that the company had altered the terms of the demerger scheme after receiving the no-objection certificate (NOC) without intimating the markets regulator, or obtaining specific written consent by it.
SEBI had issued an administrative warning to Vedanta in a letter dated August 13 in relation to the modified scheme of arrangement and directed the company to place the warning before its board, take corrective steps, and cautioned that repeat violations would invite enforcement action under the SEBI Act.
In an email response to queries sent by FE, a Vedanta spokesperson maintained that the proposed demerger is a strategic step to unlock long-term value by creating sector-focused, pure-play businesses with independent management teams.
“The Company has informed the Hon’ble National Company Law Tribunal that the Company will issue a corporate guarantee in favour of the Ministry of Petroleum and Natural Gas (MoPNG) once the Scheme becomes effective,” the spokesperson said.
Responding to SEBI statement in the NCLT, the company said, “The regulator has confirmed that it has no further comments on the merits of the Scheme and that the Tribunal may proceed with the matter. The Company has received NOCs from stock exchanges on the modified Scheme.”
Vedanta’s counsel couldn’t conclude his submissions today and the next date for hearing has been fixed for September 17.
Vedanta shares were down 1.03% at the end of day’s trading on the Bombay Stock Exchange. After hitting an intra-day low of Rs 437.6, the stock ended Wednesday’s trading at Rs 445.45 (previous close Rs 450.1).
Rising legal, investor scrutiny
Legal challenges have also emerged beyond the NCLT. Media reports suggest that the Supreme Court has upheld a ruling against Vedanta’s Talwandi Sabo power project, dismissing the company’s plea for deemed export benefits and higher compensation.
The Appellate Tribunal for Electricity had earlier held that the project was not a legitimate entity for such incentives, a view now affirmed by the apex court.
The mounting regulatory and judicial challenges come at a critical juncture for Vedanta’s restructuring plan. Announced in September 2023, the company’s proposal involves splitting into four new independent listed firms focused on aluminium, oil and gas, power, and base metals, in addition to Vedanta Limited. The stated aim is to streamline operations, improve efficiency, and unlock shareholder value. The company had initially targeted March 2025 for completion, but the deadline was extended to September 30, 2025, due to pending approvals from the NCLT and other regulators.
The mining major has been facing heightened scrutiny from investors after a scathing 100-page report by Viceroy Research, released on July 9, a day before Vedanta’s annual general meeting. The report alleged that the conglomerate is built on “unsustainable debt” and “accounting fiction”.
Viceroy claimed that Vedanta Resources Ltd (the UK-based parent) has drained cash from its listed subsidiary, Vedanta Ltd, by forcing it to declare dividends far beyond its free cash flow. Over the past three years, Vedanta Ltd has reportedly paid out $8 billion in dividends while generating only $2.4 billion in cash, a mismatch that the report said pushes the company towards insolvency.
The Vedanta board is set to meet on August 21 to consider and approve the second interim dividend for FY26.