Vedanta Demerger: $100 Billion Potential for New Companies - Agarwal

New Delhi, Mar 17 (PTI) Vedanta Ltd Chairman Anil Agarwal on Monday reaffirmed the company's commitment to unlocking value, saying the four new companies that will emerge from the demerger, have the potential to grow into USD 100 billion companies each.

The company's proposed demerger will create four independent natural resource-focused entities with management structures, capital frameworks, and strategic priorities.

In a letter to shareholders, Agarwal highlighted the need for pure-play businesses and how the proposed demerger will help Vedanta achieve this.

Vedanta plans to split the mining conglomerate into different businesses with a view to simplify the group's structure and help manage its debt burden.

Mining tycoon launched the plan to overhaul the business in 2023 after failing to take Vedanta private in 2020. According to Vedanta's demerger scheme, every Vedanta shareholder will receive 1 additional share in each of the 4 newly demerged companies on the completion of the demerger process.

The other companies that will be created out of the demerger are Vedanta Aluminium, one of the world's largest producers of aluminium; Vedanta Oil & Gas, India's largest private-sector crude oil producer; Vedanta Power, one of India's largest generators of power; Vedanta Iron and Steel - a company with a highly scalable ferrous portfolio; and Vedanta Limited – which will include the world's second-largest integrated zinc producer and third largest silver producer – in Hindustan Zinc.

He emphasized that stakeholders will directly benefit from the company's proposed move while Vedanta's unique and irreplaceable assets, sector-leading position and financial discipline will ensure a stronger growth trajectory and higher return.

"I envision that each of the demerged companies has the potential to grow into a USD 100 billion company. If you look at where we are headed as a global economy and the demand for such products, these companies and their products are the need of the hour," Agarwal said.

The currently listed Vedanta Limited entity will also continue to be a powerhouse in its own right. Among other things, it will hold over 63.4 per cent of Hindustan Zinc, the second largest integrated producer of zinc and the 3rd largest producer of silver in the world, and Zinc International which has even greater mineral resources than Hindustan Zinc has.

"Additionally, Vedanta Limited will house our growing technology businesses and continue to act as an incubator for the group," he added.

Agarwal likened the move to a banyan tree providing space for new growth. "I have always found that trees that grow under the shade of a giant banyan tree often find it difficult to grow. But once you take them out and allow them to grow under the sun, they show remarkable growth and progress.

“Vedanta is like that Banyan tree. The world today is all about pure-play businesses and Vedanta's demerger will help us achieve that. Each of our demerged entities has the potential to grow into a Vedanta by itself. The time to act is now."

The Vedanta chairman said that the company's proposed demerger has received overwhelming support from stakeholders, with 99.5 per cent of shareholders and creditors voting in favour of the plan. The company is committed to delivering on the vision.

Agarwal highlighted that any investor investing in Vedanta at the start of the past five-year period would have seen investments multiplying over 4.7 times to date, both through capital appreciation and cash dividends returned. "Vedanta delivered a dividend yield of 81% during this period, the highest amongst all its peers," he said.

With natural resources playing a key role in the development of various global economies, Agarwal emphasized the sector's contribution to economic and overall growth, and what role it can play in India.

"Most of the world's major economies – the United States, Canada, Europe, Middle East, Russia, China, South Africa, and Australia – have successfully 'farmed' the wealth that nature has blessed them with 'below the ground'.

"In Guyana, for instance, per capita income went from around USD 6000 in 2019 to USD 18,000 in 2022 after the first oil was produced, and it is today the fastest-growing economy in the world with a growth rate of over 40 per cent per annum," he said.

In India, by comparison, while the sector contributes close to 3 per cent of GDP, consumption continues to record double-digit growth, despite less than 20 per cent of the country's natural resources potential having been explored. The opportunities to grow are therefore immense, he added.

Agarwal expects the demand for critical minerals and transition metals continues to surge, driven by India's rapid economic expansion and the global shift toward a low-carbon future.

"Aluminium is growing at 12 per cent, copper at 15 per cent, and Zinc at an average of 10 per cent. This demand is only expected to increase as India and the global economy move towards embracing a low-carbon future and work toward ensuring the stability of their critical mineral and transition metal supply chains," he said.