My dream is to create 6 companies as big as Vedanta’: Billionaire Anil Agarwal on Vedanta demerger

Billionaire Anil Agarwal on Thursday said that the demerger of Vedanta Limited would create six companies, which will be as big as the parent company, Vedanta Resources. In an exclusive interview with Business Today TV, Agarwal said the shareholders will have a lot of flexibility after the demerger.

He also spoke about Vedanta’s plan for bond restructuring and said the company is committed to the interests of the shareholders and bondholders. He said there would be no problem ever in making payments on time.

Talking about the proposed demerger, Agarwal said: “My vision is each company after the demerger will be of the size of Vedanta. Shareholders will now get one share of each of the newly listed entities for every one share of the currently listed Vedanta Ltd. that they hold. The shareholder will have a lot of flexibility. The six companies will have their own CEOs. These CEOs will also be a stakeholder in the company. The companies should be run by the best of experts.”

Last week, Vedanta Limited announced it will demerge and diversify its business into six separate entities — Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Ltd.

As part of the vertical split of Vedanta Ltd, shareholders will get 1 share of each of the 5 newly listed companies for every 1 share of Vedanta.

After the demerger, the businesses of Hindustan Zinc as well as the display and semiconductor manufacturing units will remain with Vedanta Limited.

On Thursday (October 5), CRISIL Ratings placed the long-term bank facilities and debt instruments of Vedanta Limited under ‘Rating Watch with Negative Implications’.

The agency said that the ratings might be downgraded if Vedanta cannot reduce its end-of-year financial leverage to below 2.7 times through the asset monetisation route, which should be completed by December 2023. Vedanta had previously identified potential options for monetising assets such as the steel and iron ore businesses.

CRISIL has reaffirmed its ‘CRISIL A1+’ rating on the short-term debt instruments of the company. “The rating watch reflects the recent corporate announcement by Vedanta that it will demerge its aluminium, oil and gas, power, base metal (zinc international and copper business) and iron and steel businesses into separate standalone listed entities,” CRISIL stated in its note. The negative watch suggests the possibility of a rating downgrade if VRL does not complete its refinancing by the end of October 2023, as earlier anticipated by CRISIL Ratings, the note explained.

Last week, the company said: “Vedanta Limited, India’s largest diversified natural resources company with a significant global footprint, announces its plan to demerge its business units into independent ‘pure play’ companies to unlock value and attract significant investment for the expansion and growth of each business.”

The management has said that the demerger will simplify their corporate structure, give investors the option to invest in the commodity of their choice and also provide a platform for individual units to pursue their strategic agenda.

Speaking about Vedanta’s plan for bond restructuring, Agarwal told Business Today TV: “We have been doing this past 20 years, restructuring our payments as this is our cycle. We are expanding our business, we borrow funds, we raise equity. This is a process. I can assure one thing to all our bondholders and equity holders that I am very conscious about the situation. Nothing is more important to me than my shareholders and equity holders. It is my personal commitment that there will be no problem ever in making payments on time.

Recently it was reported that Vedanta Resources has seen some resistance from investors regarding its plan on bond restructuring, as they have been seeking better terms.

The proposed plan has suggested making a 50 per cent upfront payment for the $1 billion January 2024 bond, in addition to a 15 per cent payment for the August 2024 bond, and a 10 per cent upfront payment for the March 2025 bonds. The remaining amounts, as per the plan, are to be restructured.

A report in The Economic Times last month said that Vedanta Resources requires the approval of at least two-thirds of the bondholders for the bond restructuring plan to proceed. The report suggested that the initial feedback from investors in Hong Kong and Singapore hints at discomfort with the proposed restructuring, raising the possibility of opposition from a group of bond investors.

Speaking on the issue, Agarwal said: “Some forces, I am assuming, have been telling about our funds. I like to tell you that we have a good record. We have raised money in the market. If you go and look at the market to buy our bonds, you won’t get the bond. Some people are creating this situation. I am very confident that we have the best team, and people to go on with the refinancing. We have amazing cash flow, good business, fantastic workforce, and the best products.”

It is to be noted that Vedanta Ltd’s parent company Vedanta Resources Ltd (VRL) has debt repayments worth $1.3-1.4 billion to make in the next six months, including bond payments of $1 billion in January 2024. In FY25, there are debt obligations worth $3 billion, besides interest-servicing requirements.

Earlier it was reported that Vedanta Resources was in advanced talks with private credit funds namely Davidson Kempner, Bain Capital, Ares SSG Capital, and Cerberus Capital, to syndicate a $1 billion short-term loan. The proposed loans would be utilised for part-paying $3.2 billion of bonds that would be maturing in Calendars 2024 and 2025.

On Wednesday, it was reported that Vedanta Resources is in advanced discussions with JP Morgan Chase and Standard Chartered Bank to secure $3 billion. The funds are intended to help the company avoid defaulting on its upcoming payments.

Vedanta Resources has been battling a host of rating downgrades triggered by worries over outstanding dues – $6.4 billion as of May.

Last week, Moody’s Investors Service reduced its credit rating on Vedanta Resources, following which S&P Global Ratings also cut its long-term issuer credit rating and the rating on outstanding debt on the parent firm to CCC from B-, placing it under CreditWatch, with “negative implications”.

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