The Hindu Business Line : Vedanta rejigs group cos under three businesses

Mumbai, Sept. 9 Shares of Sterlite Industries and Madras Aluminium Company Ltd (MALCO) showed extreme volatility on Tuesday prompted by confusion in the market regarding a corporate restructuring programme announced by the parent company, Vedanta Resources Plc.

There was panic selling initially as investors dumped the two scrips in the early hours of trade — while MALCO bounced back to end the day with gains, Sterlite declined 7.5 per cent.

MALCO lost more than 19 per cent at its intra-day low, but swung back to register a gain of 17.37 per cent on BSE. In fact, MALCO shares had started moving up on the expectations of the forthcoming restructuring a week ago. The shares had moved up by 48.96 per cent over the last seven days on BSE from Rs 143 to Rs 214.

Sterlite shares slid 7.5 per cent on Tuesday after volatile trading during the day. The scrip touched a high of Rs 628 and a low of Rs 570.

Sterlite recently joined the elite list of Sensex companies. The stock had seen volatile trading over the past week and had lost 9.57 per cent, but over the past month there has been little movement on the counter.

RESTRUCTURING

Under the restructuring programme, the group would have three commodity-based verticals: copper, zinc and zinc-lead; aluminium and energy; and iron ore. According to the group, this is designed to eliminate conflicts of interest between the different group companies.

Vedanta also announced plans to invest $9.8 billion (over Rs 43,000 crore) to increase its aluminium production to 2.6 million tonnes a year and emerge as the world’s fifth largest aluminium producer by 2012.

“Restructuring is a very positive move. The group has presence across the non-ferrous metals sector. They obviously wanted to get rid of the cross holdings and now the businesses have clear cut demarcation,” said Mr Hitesh Agrawal, Head of Research, Angel Broking.

“It will be good for investors. The FIIs or the domestic investors will be able to understand the businesses better now, whether it is aluminium, copper or zinc,” he added.

Sterlite Industries will de-merge its aluminium and energy businesses to MALCO, which will subsequently be renamed as Sterlite Aluminium Ltd. Further, Vedanta will transfer 79.4 per cent equity interest in its mining subsidiary Konkola Copper Mines (KCM), Zambia, to Sterlite.

The scheme, which will be effective from April 1, 2009, will eliminate cross holdings between businesses arising out of MALCO’s holding in Sterlite.

In other words, after the restructuring, Vedanta will have three companies under its fold — Sterlite (which will have Hindustan Zinc Ltd, CMT and KCM), Vedanta Aluminium Ltd and Sesa Goa.

Share ratio

MALCO will issue shares to the shareholders of Sterlite in the ratio of seven for every four held in Sterlite. Further, Sterlite will issue shares to the shareholders of MALCO in the ratio of one for every 51 shares of MALCO. Sterlite will also issue one share in exchange for one share of $0.01 each of KCM. The valuation has been conducted by Grant Thornton India.

Mr Anil Agarwal, Vedanta Chairman, told presspersons that the scheme would simplify the corporate structure with fewer cross-shareholdings and overlapping businesses. It will also provide each business with the strategic flexibility and scale to pursue respective growth opportunities. “The buy-out of minorities in BALCO and HZL will remain unaffected by the restructuring,” he added.

Related Stories:
Malco: Vedanta mulls buy-back, dilution options
Sterlite expects higher profits from copper biz

More Stories on : Metals | Restructuring | Stocks | Aluminium | Sterlite Industries (India) Ltd

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