Vedanta’s demerger plan may face delays

17 Oct 2023 , 10:37 AM

Vedanta Ltd’s proposal to demerge its divisions might take longer than 12-15 months due to lender scrutiny, reports stated, citing the intricacies connected with the planned value-unlocking plan, which entails listing the resources conglomerate’s each income stream separately.

Given that the split is likely to restrict the fungibility of cash flows between companies, the company’s allocation of debt among these new entities will be scrutinized in particular.

Vedanta would also require permissions from the National Company Law Tribunal (NCLT) and the Government of India, which may be difficult to get given the upcoming federal elections next year, according to a letter to clients from the financial research and credit analysis firm.

Vedanta utilized a significant percentage of cash flows generated across companies, including Hindustan Zinc, for dividends in 2022-23 (Apr-Mar), resulting in a dividend distribution of almost Rs 38,000 crore. The move was primarily intended to assist parent company Vedanta Resources with cash.

Vedanta Resources still owes more than $3 billion in debt in 2024-25, and more than $1 billion in the next six months. 

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