Billionaire Agarwal's Vedanta to split into six businesses to fuel growth

By Sethuraman N R and Chris Thomas

BENGALURU (Reuters) -Billionaire Anil Agarwal's Vedanta Ltd on Friday launched a sweeping overhaul that will carve up the metals-to-oil conglomerate into six separate businesses in a move aimed at shoring up the group's financial performance.

The company's UK-based parent, Vedanta Resources, has also been struggling, with S&P Global Ratings becoming the latest agency to downgrade the firm, cutting its rating to "CCC" from "B-" on Friday and placing it on credit watch.

Vedanta Ltd's move also comes against the backdrop of its shares dropping 28% so far this year, compared to a near 2% rise in the Nifty Metal index, after a string of poor results due to weakness in metal prices and Foxconn backing out of a $19.5 billion chips joint venture with the company.

"The biggest benefit from this restructuring will be for Vedanta Resources, which will now be able to sell stake in the entities with more ease to reduce its debt burden," said Shriram Subramanian, founder of corporate governance and proxy advisory firm InGovern Research Services. Vedanta Resources owns 63.76% of Vedanta Ltd.

Agarwal tried unsuccessfully to take Vedanta Ltd private in 2020, while his latest attempt to trim down the parent company's debt this year by getting its unit, Hindustan Zinc, to buy some of the debt-laden firm's zinc assets in a $2.98 billion deal has faced opposition from the Indian government.

"Public shareholders may also benefit due to the divestment option in each of the businesses. However, the value unlocking may not be immediate," Subramanian added.

The six businesses being planned to be listed are Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Limited. "By demerging our business units, we believe that will unlock value and potential for faster growth in each vertical," chairman Anil Agarwal said in a statement. For every share of Vedanta Ltd, which has a market-cap of $10 billion, its stockholders will receive one additional share of each of the five companies that will be listed. The entire restructuring process is expected to be completed by financial year 2025, subject to approvals, with Hindustan Zinc CEO Arun Misra leading Vedanta Ltd. Earlier in the day, Hindustan Zinc said it plans to create separate entities for its zinc, lead, silver and recycling businesses to unlock "potential value" and will appoint external advisers to review its corporate structure.

($1 = 83.0450 Indian rupees)

(Reporting by Sethuraman NR, Varun Vyas in BengaluruEditing by Vinay Dwivedi)