Vedanta Limited, the largest diversified natural resources company in India, plans to to demerge its business units into independent “pure play” companies. The company stated that this will simplify Vedanta’s corporate structure and unlock value and attract investment into the expansion and growth of each of the businesses.
More than 90% of Vedanta Ltd’s profits are derived in India, which is forecast to be the fastest growing major economy for the next several years. According to the company demand for commodities is expected to rise exponentially as the country continues to build a world class infrastructure and strives to achieve aggressive targets for the energy transition which is highly mineral intensive. In addition, the national government has an emphasis on self-reliance that is expected to provide avenues for rapid growth for Indian companies in the commodities space.
“This is an exciting announcement for Vedanta, and India,” said Anil Agarwal, chairman of Vedanta. “Our country is on an unprecedented growth trajectory which will make us the third largest economy in the world before the end of this decade. The demand for minerals, metals, oil and gas and power is going to grow very rapidly and Vedanta’s businesses are uniquely positioned to service this rising demand and reduce reliance on imports. Vedanta is also foraying into semiconductors and display glass which are of great strategic significance to India.”
Vedanta has a unique portfolio of assets among Indian and global companies with metals and minerals — including aluminum and other light metals, ferrous metals (like iron ore and steel), oil and gas, and power (including coal and renewable energy). The demerger will ultimately result in six separate listed companies — including Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals, and Vedanta Limited. Once demerged, each independent entity will have greater freedom to grow to its potential and true value via independent management, capital allocation, and niche strategies for growth.
“By demerging our business units, we believe that will unlock value and potential for faster growth in each vertical. While they all come under the larger umbrella of natural resources, each has its own market, demand and supply trends, and potential to deploy technology to raise productivity,” said Agarwal. “In line with Vedanta’s ethos, each company will continue to retain a strong commitment to the well-being of our workforce, our communities and our planet. Even as we move to new ways of running our businesses, we will remain steadfast to transform for good.”
The new companies will remain committed to Vedanta’s goal of achieving net-zero carbon emissions by 2050 and net water positivity by 2030 with the aims to spend $5 billion over the next ten years to accelerate this transition. In the process of transitioning to net zero, the company already secured 1.8 GW of renewable energy through power delivery agreement across its group companies.
In addition, Vedanta noted that the utilization of advanced technologies has resulted in improved processes, strengthened cybersecurity, and easy access to information for effective decision making. Therefore, each of the company’s businesses has embarked on its own transformational journey towards digitalization and innovation.
Vedanta Aluminium
Vedanta Aluminium, led by John Slaven (formerly of Alcoa and BHP), is amongst the world’s leading aluminum producers, with operations in India. The company’s Jharsuguda facility (pictured above) is the largest single-location aluminum smelting facility outside of China, and recently saw its capacity ramp up to 1.8 million tonnes per year. This facility is accompanied by Bharat Aluminium Company Ltd. (BALCO), which is a 51% owned subsidiary of Vedanta Limited, bringing the total group capacity to 2.4 million tonnes per year.
In the most recent financial year ending on March 31st, 2023, Vedanta Aluminium achieved its highest ever aluminum production of 2,291 kt, maintaining its place as the country’s largest supplier with c.41% market share in India among primary aluminum producers. The company is currently on a path to grow production to 3 million tonnes per year, while simultaneously improving its cost position to 1st quartile globally through full backward integration. Importantly, the business is growing its production of green aluminum under the Restora and Restora Ultra brands.