Vedanta scraps rejig plans, to continue with current model

“Company has concluded this comprehensive review with inputs from various experts and advisors. The Board of Directors concludes that the current structure is optimal and is commensurate with the current scale and its diversified lines of businesses. Therefore, the company will not undertake any corporate restructure including demerger/spin off etc. and will continue with its existing structure,” Vedanta Ltd said in a regulatory filing with the bourses.

Last November Vedanta said it is considering separating its aluminium, steel, and oil and gas businesses, and publicly listing them, as it seeks to unlock value and simplify the company’s structure. It had appointed a committee of directors to evaluate the options.

The earlier plan was to restructure Vedanta by carving out its three businesses which would have operated parallelly as the company thought all the three businesses have great potential for growth.

Anil Agarwal, Chairman said “ We will continue to focus on operational performance to enhance profitability and free cash flows. We are committed to right levels of leverage and strong balance sheet to maximize shareholders value”.

Vedanta is a unit of London-based Vedanta Resources Ltd, which has operations across oil and gas, metals and power in India, South Africa and Namibia. Vedanta Resources, in turn, is controlled by Volcan Investments, an investment arm of Agarwal. The group has recently forayed into steel production in India and is among the bidders for state-run fuel retailer Bharat Petroleum Corp. Ltd.

On Tuesday Vedanta’s scrip ended 1.22% up at ₹369.60 on the BSE while the Sensex closed 0.33% up at 57808.58 points. The announcement was made after market hours.

Vedanta further informed the stock exchanges that its capital allocation policy will be based on a “consistent, disciplined, and balanced” allocation of capital with long term balance sheet management.

The company will maintain optimal leverage ratio (Net Debt/EBITDA) at consolidated level, it said, adding that it would be distributing a minimum of 30% of the attributable profit after tax as dividends.

“Vedanta Limited’s Dec’21 consolidated leverage ratio is 0.7x, which is amongst the best compared to peer group. During normal business cycles, the company will maintain this ratio below 1.5x at consolidated level,” the company said, adding that overall capital allocation will maximize total shareholders returns (TSR), it further said.

The company’s capital allocation policy will be the primary guiding factor, the company said, adding that it will focus on organic growth.

“The bid for BPCL is at EOI stage. In case the transaction culminates, Company may undertake management of the acquired business, through appropriate profit-sharing arrangement or on management fee model. A specific fund, with a strategic investor will be set up to fund the potential investment, without leveraging Vedanta Limited’s Balance Sheet,” Vedanta said.