Vedanta Demerger: 2025 Company Split, Timeline & Investor Impact

Vedanta plans out a mega demerger

A few years after consolidating his businesses, Anil Agarwal is now reversing course with a major Vedanta demerger plan. Vedanta Ltd will be split into 6 separate companies, each focusing on a distinct business vertical.

This move aims to isolate financial risks and business cycles, allowing each entity to operate independently. While debt allocation remains a key challenge, more details are awaited. Shareholders will receive 1 share in each demerged entity for every 1 Vedanta Ltd share held pre-demerger.

• Vedanta aluminium, which includes BALCO and other aluminium interests of Vedanta. It will be the largest company with revenues of over Rs50,000 crore.
   
• Vedanta Oil & gas, which will comprise of the upstream business of Cairn Energy and Cairn India.
   
• Vedanta Base Metals, which will include the other non-ferrous metals of the group, principally the Sterlite Copper business.
   
• Vedanta Steel, which will include the Electrosteel business and the iron ore mines which it had got as part of the acquisition of Sesa Goa.
   
• Vedanta Power, which will consolidate most of the captive power capacities of the group and also the pure power plays owned by them. 
   
• Finally, it will retain Vedanta Ltd which will now hold the 69.4% stake in Hindustan Zinc Ltd and also incubate fresh businesses like semiconductors.

Table of Contents

1. Vedanta plans out a mega demerger
2. Ironic financials make a case for the demerger
3. How the demerged businesses of Vedanta will look?
4. What exactly is holding up valuations?

Ironic financials make a case for the demerger

Vedanta Ltd’s financials present an interesting contrast. Its market cap is around ₹85,000 crore, yet its 64.9% stake in Hindustan Zinc alone is worth ₹88,000 crore. This means investors essentially get all other Vedanta businesses—generating ₹1.5 lakh crore in revenue—for free.

If Vedanta sold its entire Hindustan Zinc stake, it could become debt-free, though it would lose a major profit source. The stock trades at a very low P/E of 2.8X, showing how undervalued it appears, especially given its strong EBITDA.

The Vedanta demerger plan aims to split the company into six separate entities to unlock value. Whether the Vedanta business restructuring will improve valuation is uncertain, but it marks a big shift from Anil Agarwal’s earlier strategy of consolidation.

This Vedanta group company split could reshape how each business is valued independently. Investors await more clarity in the next Vedanta investor update to understand the Vedanta demerger impact on stock price, the fate of Hindustan Zinc separation, and how the Vedanta business units 2025 will operate.

For now, the Vedanta subsidiaries list and structure will change dramatically under the Vedanta ltd demerger, offering both risk and opportunity.

How the demerged businesses of Vedanta will look?

Here is a quick look at how the FY23 numbers for the demerged entity will look like for the various business groups.

Data Source: Vedanta Ltd

Despite strong group-level profitability, Vedanta Ltd shows major contrasts across business verticals. High-margin units like Hindustan Zinc and oil & gas earn over 50% EBITDA margins, while others like base metals and steel remain in low-margin territory.

The Vedanta demerger plan aims to unlock value by separating these businesses, potentially boosting high-margin segments while stabilizing others—making the Vedanta ltd demerger value accretive overall. However, challenges persist across verticals.

Aluminium faces stiff competition from Hindalco and NALCO. The Hindustan Zinc separation is stalled due to government inaction. Sterlite Copper's revival hinges on the Tuticorin plant, shut since 2018. Steel may be exited, but iron ore mines will be retained. Oil continues to deal with royalty and licensing issues.

As part of the Vedanta group company split, the Vedanta business restructuring will redefine its future. Investors await the next Vedanta investor update for clarity on the Vedanta demerger impact on stock price, performance of Vedanta business units 2025, and the evolving Vedanta subsidiaries list post-demerger.

What exactly is holding up valuations?

Despite strong operations, Vedanta has historically traded at low valuations due to concerns over short-term solvency, global debt, and corporate governance.

On solvency, Vedanta Ltd faces $2 billion in debt repayments in 2024, with funding uncertain due to nearly 100% pledged promoter holdings. This raises investor concerns, especially as liquidity remains tight.

The global parent, Vedanta Resources, was recently downgraded by S&P due to loan extension risks and overreliance on dividends from Vedanta Ltd. This adds pressure to the overall group structure.

Corporate governance concerns have also impacted sentiment—like the 2019 related-party red flags and the failed 2020 delisting attempt blocked by LIC. These issues hurt trust and valuations.

The Vedanta demerger plan and Vedanta business restructuring may not boost value unless liquidity, governance, and debt issues are resolved. Investors await the next Vedanta investor update to assess the true Vedanta demerger impact on stock price, future of Vedanta subsidiaries list, and how Vedanta business units 2025 will function after the Vedanta ltd demerger and Vedanta group company split.