Anil Agarwal-led metals and mining behemoth Vedanta’s first de-merger scheme regarding Talwandi Sabo Power Plant came to a halt. This is because NCLT canceled it on account of an undisclosed liability by Talwandi Sabo. However, Axis Securities is positive on the demerger plans and expects it to be over in the second half of the next financial year.
According to the report by Axis Securities, “we continue to see value unlocking post demerger especially from the Aluminium business. Going forward, the company will go for the 2nd motion of NLCT approval along with other statutory approvals and parallelly work towards mining leases and other assets transfers to the demerged entities. The entire demerger process is expected to be completed in H2FY26.”
Vedanta: What’s the aim behind demerging business?
Vedanta demerger aims to simplify the corporate structure, provide investment choices, align strategies with markets, and unlock value across assets. The brokerage expects the demerger process to be finalized in H2 FY26.
In 2023, Vedanta’s board approved the de-merger into six different listed entities, which are Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals, and Vedanta.
How the Vedanta demerger can help unlock value
As per Axis Securities’ assumptions for debt split across demerged entities, “70% of the Ved Ltd standalone debt has been assigned to the demerged Aluminium business, 10% to O&G, 3% to Steel and Ferrous, 2% to Power and the remaining 15% to the residual Ved Ltd.”
Similarly for cash and CE they have assigned “20% cash towards the demerged Aluminum business, 10% towards Oil & Gas, 3% towards Steel and Ferrous, 2% to Power, and the remaining 65% towards the residual Ved Ltd.”
According to the, “both VEDL and its parent Ved Rcs have primary focus on deleveraging the balance sheet. Vedanta Resources (Parent) has de-leveraged by $4+ Billion in the last 2.5 years, and debt as of Jan’25 stands at $4.9 billion. It has plans to de-lever by $3 billion in the next three years Vs the FY24 debt level of $5.8 billion. It has already achieved $1 billion of debt reduction. Group Net Debt/EBITDA is currently at 2.3x, and the near to medium term target is to reduce it to 1x.”
Vedanta Base Metals not a problem in value unlocking
Earlier, the Vedanta Base Metals demerger was postponed by the company’s management to maximize the value of the business for shareholders. Also, NCLT rejected the de-merger scheme due to a legal challenge for Talwandi Sabo Power (TSPL). The company allegedly owed Rs 1,251 crore to a Chinese firm SAPCO. However, this does not affect the overall demerger progress for other business verticals, said Axis Securities. “For our post-Demerger SoTP, we assume the resolution of the TSPL demerger.” Vedanta Base Metals will be retained in legacy Vedanta Ltd., and will not impact the scheme.
Vedanta’s performance in Q3
The company reported a jump of 76% year-on-year in its consolidated net profit to Rs 3,547 for Q3 FY25. It reported a net profit of Rs 2,013 crore in the same period a year ago. Its revenue from operations increased 10% YoY to Rs 38,526 crore in the third quarter of FY25, compared to Rs 34,968 crore in Q3 FY24.
Vedanta Vs Nifty 50
Vedanta’s share price has risen 7% in the past five trading sessions. It has given a return of more than 4% in the previous one month and 3% in the last six months. The stock has risen 60% in the past one year.
To compare, the benchmark index, Nifty 50 has risen 1% in the last five days. The index has fallen 2.7% in the past one month and 10% in the last six months. However, the index is still holding some gains for the last one year.