If approved it would help the conglomerate owned by Indian tycoon Anil Agarwal get a higher valuation for its aluminium business.
London-listed Vedanta has hired Morgan Stanley, Credit Suisse and JP Morgan Cazenove to put together a plan that would result in Vedanta Aluminium being listed on the New Delhi and Mumbai stock exchanges.
Sources said Vedanta wanted to make its Indian business easier for investors to understand. Its Indian businesses are currently consolidated under Sterlite Industries, which makes copper and holds stakes in companies smelting aluminium and zinc.
If the plan is approved by shareholders and regulators, Sterlite would be the main maker of copper, zinc and lead while the bulk of the aluminium business would be with the new listed company, Vedanta Aluminium.
Both would be majority owned by Vedanta Resources. Vedanta Aluminium is currently 70% owned by Vedanta Resources and 30% with Sterlite Industries.
Shareholder proposal
The demerger proposal would require clearance from shareholders and a high court approval, which could take about three months.
Bharat Aluminium, or Balco, another aluminium company in the Vedanta fold, is not part of this plan, since the government owns 49% of it. Any consolidation of Balco into the new aluminium business would happen only if the government sells its stake. Sterlite and the government have so far not been able to agree a price.
While Balco makes about 350kt/y of aluminium at its smelter in Korba, Vedanta Aluminium plans to put together an integrated aluminium operation in Orissa, which would consist of a 1.75Mt/y smelter at Jharsuguda, 5Mt/y alumina refinery and a captive power plant of 1215MW.
If Vedanta Aluminium was to agree a price for Balco and was to complete its controversial mining project in Orissa, India, it would catapult the Vedanta Group into the world’s fourth-largest aluminium player, behind Rusal of Russia, Alcoa of US and Chalco of China.
The demerger proposal comes at a time when Vedanta Aluminium’s mining project in Niyamgiri, Orissa has come under regulatory glare for alleged environmental trans-gressions, which are strongly denied by both Vedanta and the Orissa state government.