Vedanta Demerger: Shares of Vedanta Ltd and its newly listed demerged entities witnessed mixed trading on Tuesday, 16 June, a day after making their stock market debut. While some of the newly carved-out businesses came under selling pressure amid profit booking, others attracted buying interest, highlighting diverging investor sentiment towards the individual businesses created under the group’s long-awaited restructuring exercise.
The parent company, Vedanta Ltd, declined 1.7% to ₹297.50. Among the demerged entities, Vedanta Aluminium Metal Ltd was locked in the 5% lower circuit at ₹475.65, while Vedanta Oil & Gas Ltd also hit its 5% lower circuit limit at ₹35.20.
In contrast, Vedanta Iron & Steel Ltd emerged as the biggest gainer among the demerged entities, hitting its 5% upper circuit at ₹22.10 on the BSE. Vedanta Power Ltd also traded in positive territory, rising 2.3% to ₹41.90.
Vedanta lists of four new entities
The mixed performance comes a day after shares of Vedanta’s four demerged companies began trading on the stock exchanges, marking the completion of one of the most closely watched corporate restructuring exercises in the Indian commodities sector.
Vedanta Aluminium Metal Ltd had emerged as the strongest debutant among the four entities, listing at ₹522 per share. Vedanta Oil & Gas Ltd debuted at ₹38 per share on the NSE, while Vedanta Power Ltd and Vedanta Iron & Steel Ltd listed at ₹41.8 and ₹20 per share, respectively.
Based on the listing prices of the four demerged entities and the prevailing market value of Vedanta Ltd, the combined implied value of all five companies stood at approximately ₹933 for every original Vedanta share held by investors. This represented a premium of around 20.6% compared with Vedanta’s pre-demerger closing price of ₹773.6 recorded on April 29.
The valuation indicates that investors have assigned a higher aggregate value to the standalone businesses than they previously attributed to the conglomerate structure.
Vedanta Demerger details
Under the approved 1:1 demerger scheme, shareholders received one share of each demerged company for every one share held in the previously listed Vedanta Ltd, completing the separation of the group’s major business verticals into independently traded entities.
This means shareholders received one share each of Vedanta Aluminium Metal Ltd, Vedanta Oil & Gas Ltd, Vedanta Power Ltd and Vedanta Iron & Steel Ltd for every one share of Vedanta Ltd held as of the May 1 record date.
Vedanta had turned ex-demerger on April 30 through a special pre-open session, during which the stock price was adjusted to ₹289.5 from its previous closing level of ₹773.6.
The demerger was undertaken with the objective of creating sector-focused businesses with independent management teams and separate capital allocation frameworks.
The newly listed entities represent distinct business verticals within the Vedanta group, including an aluminium producer, an upstream oil and gas business, a power generation company and a ferrous materials business. The residual Vedanta Ltd continues to be anchored by its stake in Hindustan Zinc along with other assets.
Vedanta had earlier stated that the restructuring would simplify the group’s corporate structure by creating independent, sector-focused businesses. According to the company, the move is expected to provide global investors, sovereign wealth funds, retail investors and strategic investors with direct exposure to dedicated pure-play companies linked to India’s growth story through Vedanta’s portfolio of assets.
The company had also said that the demerger would allow each business to pursue its own strategic priorities more effectively while improving alignment with customers, investment cycles and end-market opportunities.
The restructuring received approval from the National Company Law Tribunal (NCLT) in December last year.
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.
