Vedanta Kicks Off Demerger Process, Incorporates Base Metal Subsidiary

Vedanta has approximately $4 billion in pending payments until FY25. The company intends to fulfill all 2024 monetary obligations and has also secured $1 billion in funding in the pipeline.
Vedanta Group
Vedanta Group

Vedanta Group has incorporated its subsidiary, Vedanta Base Metals Ltd, as a separate entity as the formal initiation of the demerger process. This development is a part of the demerger process officially announced last month, with the primary objective of enhancing the efficiency and structure of the metal business operations conducted by Vedanta Base Metals Ltd.

From 2012 to 2017, the conglomerate engaged in a series of mergers involving its entities. In November 2021, there was a contemplation regarding the establishment of distinct listed entities; however, this plan was ultimately not executed, until last month. The separation is expected to come to its completion within 12-15 months.

"Pursuant to the provisions of Regulation 30 of SEBI Listing Regulations, we wish to inform you that a wholly owned subsidiary of the Company, in the name of 'VEDANTA BASE METALS LIMITED' has been incorporated on October 09, 2023." The conglomerate stated in its regulatory filing.

Concerns surrounding its $6.4 billion outstanding debt had led to a sequence of credit rating downgrades for its parent company, Vedanta Resources.

Keeping in view the above obligations, the company is encountering obstacles in securing funds as well. In a corporate move, the company explored debt reduction by orchestrating a $2.98 billion deal involving Hindustan Zinc, a subsidiary of Vedanta Ltd., to acquire specific zinc assets from the parent group. However, the center defied the move as it owns a considerable stake in Hindustan Zinc.

Vedanta has approximately $4 billion in pending payments until FY25. The company intends to fulfill all 2024 monetary obligations. It has secured $1 billion in January and expects $500-$600 million in August, with ongoing discussions with bondholders.

However, much of the outcomes of the demerger still stay ungauged as the structurization of the conglomerate’s massive debt remains in the work-in-process category. Vedanta’s share price saw minor gains of 2 percent, reaching a trading price of Rs 227.  

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