Vedanta abandons corporate rejig plans, to distribute 30% of profits as dividend

9 Feb 2022 , 02:41 PM

Vedantas board on 17 November 2021 proposed that the company should review its corporate structure and evaluate full range of options and alternatives to unlock value and simplify the corporate structure.

The company reviewed the plan with inputs from various experts and advisors. The board concluded 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.

Further, the company reiterated its focus on capital allocation, including rewarding shareholders. The capital allocation outlay across three large streams will be as under capital expenditure, dividend policy and inorganic growth.

The capex includes both growth and sustaining capex and substantive amount of this outlay will be in existing lines of operations with focus on volume augmentation, cost reduction, ESG and moving to value added products, which command higher margins.

Further, sustaining capex will be tracked on per ton basis and managed through annual operating plan exercise.

Vedanta said minimum 30% of attributable profit after tax (before exceptional items) of company (excluding profits of HZL) will be distributed as dividend.

The company will also selectively invest in acquisitions, which are accretive to existing businesses or that have synergies with its core businesses.

Vedanta said that the capital allocation policy will be the primary guiding factor and it will focus on organic growth. The company will consider select mergers and acquisitions, within the overall capital allocation framework. The company said it has proven expertise and successful track record of turning around acquired businesses. The company will participate in divestment program which has strategic fit with the portfolio.

The company further said the bid for BPCL is at EOI (Expression of Interest) stage and in case the transaction culminates, the 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 Vedantas balance sheet.

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, a subsidiary of Vedanta Resources, is one of the worlds leading oil & gas and metals company with significant operations in oil & gas, zinc, lead, silver, copper, iron ore, steel, and aluminium & power across India, South Africa and Namibia.

On a consolidated basis, the diversified natural resources firms net profit rose 26% to Rs 4,164 crore on 50% increase in net sales to Rs 33,697 crore in Q3 December 2021 over Q3 December 2020.

Shares of Vedanta were up 0.37% at Rs 370.95.

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