From HUL’s ice cream spin-off to ITC’s Hotel Split and Tata Motors’ strategic restructuring, the enterprise restructuring is redefining Indian companies. To drive concentrated growth, increase efficiency and unlock untapped potential.
Now Vedanta has come into focus and is ready for transformation.
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About Vedanta
Vedanta is a global natural resources giant with a strong presence in India, operating across multiple sectors including aluminum, copper, zinc, lead, iron ore, oil and gasoline, and power generation.
In addition, the company produces pig iron and metallurgical cola when providing transportation and port services.
In addition to India, Vedanta has strengthened its position as a global player by operating in key global regions including the United States, Asia Pacific, Europe, the Middle East and Africa.
On February 18, 2025, Vedanta held a meeting with shareholders, secured creditors and unsecured creditors, all of which overwhelmingly supported the restructuring plan. The formal regulatory documents on February 20 confirmed the approvals, marking a key milestone for Vedanta toward a more agile and growth-driven structure.
Read this | For Vedanta, Dividend and DEMERGER Delay Play Breaker
Although the plan has begun a motion, it is still awaiting approval from the statutory, government and regulatory authorities. If executed successfully, the specialist can redefine Vedanta’s corporate landscape.
DEMERGER Program
In 2023, Vedanta Ltd, led by Anil Agarwal, launched its ambitious Demerger Blueprint, aiming to split the company into five independent, department-centric entities.
The restructuring will allow Vedanta Aluminum Metal Ltd, Talwandi Sabo Power Ltd, Malco Energy Ltd and Vedanta Iron and Steel Ltd to operate in separate businesses, specializing in aluminum, power generation, oil and gas and iron ore respectively.
The Demerger program aims to create globally-scale entities with sharp strategic focus and has received overwhelming support, with 99.99% of shareholders, 99.59% of secured creditors and 99.95% of unsecured creditors voted to support, according to the company’s stock exchange application.
It is expected to be completed in the first quarter of 2025.
What is the final company?
The reorganization of Vedanta will result in five different department-centric entities.
Vedanta Aluminum will continue to be one of the world’s largest aluminum producers, while Vedanta Oil and Gas will remain India’s largest private-sector crude oil producer. Vedanta Power will become one of the country’s leading power producers, and Vedanta Iron and Steel will be a key player in the iron products industry.
Parent company Vedanta Ltd will continue to serve as an incubator for emerging businesses, including the group’s technological adventures.
By building businesses independently, Demerger allows investors to own separate stakes in each business, thus directly reaching specific industries with unique growth potential. Over time, each entity is expected to attract a range of investors, strategic partners and financial stakeholders, facilitating deeper collaboration and unlocking sector-specific expansion opportunities.
Demerger benefits from Vedanta
Analysts believe that the staff will improve operational efficiency by allowing management to focus on personal business verticals. The restructuring is expected to unleash hidden value, improve resource allocation and attract professional investors.
Currently, Vedanta operates a highly diverse portfolio of metals, mining, oil and gas, and electricity generation. By simplifying this structure, each business will be better positioned to be independent growth while Vedanta Ltd continues to oversee its benchmark metal operations.
What does this mean for shareholders?
For Vedanta shareholders, this marks a key shift. Investors will acquire one share in each of the four newly formed companies, giving them direct access to all five businesses without additional fees.
This restructuring enhances portfolio diversity while giving shareholders more flexibility to focus on specific industries within the Vedanta ecosystem. Each entity operates independently and investors can benefit from industry-driven growth while retaining their stake in larger groups.
Over time, this structural change is expected to generate greater investor interest and may drive better valuations and liquidity in Vedanta’s business.
Vedanta Financials
In the December 2024 quarter, Vedanta reported operating revenue ₹385.3 billion, up 10% year-on-year ₹349.7 billion a year ago. Net profit increased by 76% year-on-year ₹35.5 billion, from ₹The previous year was 20.1 billion. Merged EBITDA rose 30% year-on-year ₹112.8 billion, profit margin increased to 34%.
Vedanta recorded its highest third-quarter EBITDA ever, due to a strategic drive to cost optimization and production major businesses. This approach allows the company to maintain its strong performance and continue to perform well.
For the entire fiscal year 2024, the revenue station is ₹1.437 billion, reflecting a year-on-year decrease of 2.4%. At the same time, net profit fell to ₹75.3 billion. Between 2020 and 2024, Vedanta’s net sales increased by 9.3%, and most importantly, profitability. Over the past five years, the average return on equity and return on capital have been 24.4% and 25% respectively.
Recent developments
Vedanta recently secured the status of the preferred bidder for Madhya Pradesh. The state’s Ministry of Geology and Mining has invited tenders to obtain a composite license through electronic auctions. Vedanta participated in the real-time bidding process and became the highest bidder.
The mine is currently in the G4 exploration stage. This phase, known as reconnaissance, involves the large-scale identification of potential mineral deposits through base-level exploration, systematic geological mapping and aerial geophysical surveys. With this development, Vedanta strengthened its footprint in India’s natural resources sector, aligning with its strategy to expand to high-value mining assets.
What’s next?
Vedanta outlines an ambitious expansion plan that promises $8 billion in growth capital expenditure over the next few years. Of these, $1 billion will be allocated over the next five years to enhance copper and cobalt production. The company also aims to expand its aluminum production capacity to 3.1 million tons per year, of which 90% consists of value-added products and alloys.
As part of its lagging strategy, Vedanta will target the first ore production of the Kurloi and Radhikapur coal mines in the first quarter of fiscal 26. The plan is expected to ensure a stable supply of raw materials to support its aluminum operations.
in conclusion
Demand for primary aluminum and zinc grew 16% to 17%, and is expected to have a strong momentum in the coming years, driven by the booming infrastructure, manufacturing, automotive and EV/renewable energy sectors. Although global demand for these minerals is expected to grow by an average of 2-3%, demand in India is expected to grow at a significantly higher rate of 5-9%.
With advances in technology and investment growth, the semiconductor industry is expected to achieve exponential growth, estimated to be around 9% between 2024 and 2027. Ongoing infrastructure developments throughout India further enhance the industry prospects, placing Vedanta in the utilization of these emerging opportunities.
Investors should evaluate the fundamentals of a company, corporate governance and stock valuation as key factors when conducting due diligence before making investment decisions.
Happy investment.
Disclaimer: This article is for informational purposes only. This is not a stock suggestion and should not be handled like this.
This article is from Equitymaster.com
