Shares of Vedanta Ltd increased by 2 percent in Thursday’s trading session due to reports suggesting that the metals and mining company was considering demerging its businesses into separate listing entities. The stock had seen a decline in the previous six trading sessions, primarily due to concerns about the debt restructuring of London-listed Vedanta Resources, which prompted Moody’s to lower its credit rating for the parent company, citing increased risks.
A recent report from Bloomberg indicated that Vedanta was in the process of finalizing a deal to demerge various businesses, including oil and gas, iron ore, aluminum, and steel, into separate listed entities. This restructuring is expected to assist Anil Agarwal in managing the debt burden of his group.
Vedanta, which had 15.28 lakh retail investors as of June 30, saw a 1.96 percent increase, reaching a high of Rs 213.05 on the BSE. However, the stock has experienced a 33 percent decline year-to-date.
Moody’s issued a warning this week that it could further downgrade the ratings of Vedanta Resources if the parent company fails to make progress on funding arrangements to service its debt, increasing the risk of default beyond the current ratings. Vedanta Resources has already pledged its entire shareholding in Vedanta and their 64 percent share in Hindustan Zinc. Deven Choksey, Managing Director of KRChoksey Shares and Securities, pointed out that due to the creditors’ claims on cash-generating assets, especially those of Hindustan Zinc, the ability to demerge other units is limited.
Choksey emphasized that it would be a mistake not to tap into equity investors at this stage, given the significant interest from global investors in investing in India.