Vedanta Resources Plc, controlled by billionaire Anil Agarwal, has embarked on a restructuring plan to eliminate cross-holdings and streamline the corporate structure. The recast will result in three commodity focussed verticals—copper and zinc-lead, aluminium and energy and iron ore. Analysts say that the move is beneficial for shareholders.
“Sterlite Industries will establish core competency in commodity and energy businesses. This is good for the shareholders in the long-run,” said Alex Mathews, head (research), Geojit Financial Services.
Under the scheme, Sterlite would demerge its aluminium and energy businesses to Madras Aluminium Company Ltd (MALCO) with effect from April 1, 2009. For every four share held in Sterlite, the shareholders would get seven equity shares in Malco. For the demerger of Malco's investment into Sterlite, Sterlite Industries would issue one share for every 51 equity shares held in Malco. Besides, the other aluminium business undertakings of the Vedanta Group would also be demerged into Malco which include the Aluminium foils plant at Sanaswadi, 51 per cent stake in Balco and 29.5 per cent stake in Vedanta Aluminium. Vedanta would transfer 79.4 per cent equity interest in Konkola Copper Mines Plc to Sterlite.
While copper and zinc-lead businesses will come under Sterlite Industries, aluminium-energy and iron ore businesses will be managed by Vedanta Aluminium Ltd and Sesa Goa respectively.
“The restructuring will unlock shareholder value. Each vertical will independently drive the business and there will be management focus,” said Anil Agarwal, Chairman, Vedanta Resources.
The reorganisation, which will take effect in April next year, will involve share swaps between several of the current group companies, according to a statement.
Vedanta is investing Rs 115,000 crore to expand its aluminium capacity in India in attemp to become the fourth largest aluminium producer in the world. “We have already invested Rs 40,000 crore. Rs 75,000 crore will be invested in three years. We have cash reserves of Rs 30,000 crore will generate Rs 20,000 crore in three years and the balance would be raised through debt,” Agarwal said.