New Delhi: London-listed Vedanta Resources Plc’s plan to recast the cross-holdings of its group companies is aimed at ensuring that at least one listed Indian unit owns a stake in each of the firms, an executive said on Wednesday.
“We are looking at various strategies that would increase the share value of the companies and also to see how to use the funds available,” said the official in a Vedanta unit, who requested anonymity. “The thinking also is that if we are operating in India, we have to have some Indian shareholders.”
Corporate restructuring: Sesa Goa managing director P.K. Mukherjee. Photo: Ron D’ Raine / Bloomberg
Vedanta announced on Tuesday on its website that it is working to consolidate its corporate structure in line with an earlier stated policy, but fears over the outcome of such a restructuring battered down stock prices of group firms.
Shares of Sesa Goa Ltd ended at Rs 236.40, down 4.18%, on BSE. Shares of Sterlite Industries India Ltd took a bigger beating, ending at Rs 119.90, down 6.62%. The benchmark Sensex shed 1.5%. Vedanta declined 3.64% on the London Stock Exchange on Wednesday.
There is no deadline for the company to take a decision, Sanjay Choudhry, associate vice-president of corporate affairs, Sesa Goa, said on Wednesday.
“There are a number of companies involved. There is Sesa Goa, Sterlite, Vedanta group,” Choudhry said. “Once the group decides, we will be ready to make an announcement.”
“The board will be called upon at the discretion of the company,” said P.K. Mukherjee, managing director of Sesa Goa.
Vedanta may restructure the group’s various units by making Sterlite Industries their holding company, which will also include the recently acquired oil explorer Cairn India Ltd, The Economic Times reported on Wednesday. The restructuring was also reported by news agencies and business television channels.
The objective of the current restructuring exercise differed from an earlier attempt in 2008, which did not fully go through, said the unnamed official cited above.
“Earlier, we wanted to have four verticals (business segments) for aluminium, copper, zinc and lead, and energy, but that did not work out,” the official said.
The official also said the litigation over bauxite mining at Niyamgiri hills in Orissa in the Supreme Court also requires that each Indian unit has a locally listed shareholder to ensure there is a local flavour.
“During the proceedings in the court, it was observed that one Indian company has to be made accountable for the group’s activity here,” the official said.
The most probable scenario is a merger of Sesa and Sterlite Industries, with Sesa owners demanding and getting a premium swap ratio, according to a note to clients from Barclays Capital. “Integrating Vedanta Aluminium at a bad price with Sterlite is a tough task for Vedanta as it will be opposed by investors, in our view,” the Barclays Capital note said. “Vedanta Aluminium is a problem asset (non-public) and minority investors in 2008 managed to stop a similar integration.”
ruchira.s@livemint.com