Mining conglomerate Vedanta is on schedule to demerger its major businesses, including aluminum, into distinct listed companies. Debt would be distributed among the dissolved organizations proportionate to their assets.
According to Vedanta, the process of engaging with its lenders on the matter has advanced and gone without hiccups.
“The debt will get divided amongst the resulting demerged entities in the ratio of assets getting allocated to them as per the prescribed rules and regulations,” a senior company official mentioned during an investor programme.
The official stated that the debt allotted to the company would be directly proportionate to the book value of the assets it had, using Vedanta Aluminium as an example. This is to guarantee tax neutrality of the transaction.
Six separate verticals will be established following the exercise: Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals, and Vedanta Limited.
According to insiders, SBICAPs has been brought on board to represent lenders with regard to debt distribution, and they want to receive the NOCs as soon as possible. Vedanta is starting a deleveraging program concurrently with the demerger in order to reduce group debt by $3 billion over the course of the following three years and get its net debt down to less than $9 billion.
“The demerger is expected to simplify the Group’s corporate structure with sector-focused independent businesses. Each of our businesses is at a global scale hence the board decided to go for a demerger. We intend to build a corporate structure with asset ownership and entrepreneurship mind-set, where each company would chart out its growth trajectory.”
“The demerger will give global investors, including sovereign wealth funds, retail investors, and strategic investors, direct investment opportunities in dedicated pure-play companies. With listed equity and self-driven management teams, the demerger would also provide individual units a platform to pursue strategic agendas more freely and better align with customers, investment cycles, and end markets,” Vedanta mentioned in their demerger statement.
