Vedanta’s bold demerger aims to transform asset management into ownership, investing $1.9 billion to become global industry leaders.

Vedanta Ltd is undergoing a major transformation with a proposed demerger of its various business units, which cover over 15 commodities. This strategic move aims to transition the company from asset managers to asset owners, allowing it to create independent companies focused on sectors like aluminium, oil and gas, power, and steel. With 75% approval from secured creditors, Vedanta plans to simplify its corporate structure and attract direct investments from global investors. Chairman Anil Agarwal highlighted that the company will invest USD 1.9 billion as growth capital expenditure from FY24 onwards. Recently, Vedanta reported a significant 36.5% increase in net profit, underscoring its strong financial performance amid ongoing operational improvements.

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Vedanta Plans Major Demerger and Growth Investment

Vedanta Ltd, a leading diversified natural resources company, is set to embark on an ambitious plan to demerge its various business verticals. Chairman Anil Agarwal announced that this move will allow the company to transition from being asset managers to asset owners. The demerger will create independent entities focused on key sectors such as aluminium, oil and gas, power, steel, and base metals. The zinc division and other new ventures will continue to operate under Vedanta Ltd.

This strategic shift aims to simplify the company’s corporate structure and provide global investors with direct access to pure-play companies that capitalize on India’s robust economic growth. Vedanta has already secured approval from 75 percent of its secured creditors for the demerger plan and filed the necessary scheme with the National Company Law Tribunal (NCLT). The company is hopeful of finalizing the process by the end of the fiscal year.

In alignment with this transformative journey, Vedanta is committing USD 1.9 billion for growth capital expenditures across its businesses starting from FY24. This investment comes on the heels of a strong financial performance, with a 36.5 percent increase in consolidated net profit for the quarter ending June 30, 2024, amounting to Rs 3,606 crore.

Vedanta operates in multiple sectors, including oil and gas, zinc, lead, silver, copper, iron ore, steel, aluminium, and power across India, South Africa, and Namibia. As the company moves forward, it looks to consolidate its assets to emerge as a global leader in each of its segments.

Last Updated: September 08, 2024 | 11:21 AM IST.

1. What does it mean for Vedanta to become an asset owner?

Becoming an asset owner means that Vedanta would own the physical resources and businesses outright instead of just managing them for other investors. This gives the company more control over its operations and profits.

1. Why is Vedanta looking to change from being an asset manager to an asset owner?

Vedanta wants to have more direct control over its resources, allowing for better decision-making and potential for higher profits. Owning assets can lead to long-term growth and stability for the company.

1. How will this change benefit Vedanta’s shareholders?

If Vedanta successfully transitions to an asset owner, shareholders could see better returns as the company potentially generates more profits from its owned assets. It aims to create more value in the long run.

1. What challenges might Vedanta face in this transition?

Vedanta could face challenges like needing more capital to acquire assets, managing risks involved with owning the assets, and ensuring operational efficiency. These factors need careful planning and execution.

1. What steps is Vedanta taking to move towards being an asset owner?

Vedanta is looking to acquire more companies and assets in areas that align with its business strategy. The company is also focusing on improving its existing operations to ensure they are profitable and sustainable.