Vedanta Should Purchase Its Parent Company African Copper Business: Agarwal
Vedanta Should Purchase Its Parent Company African Copper Business: The mining billionaire Anil Agarwal has proposed that Vedanta Ltd, a publicly traded firm, buy Konkola Copper Mines from Vedanta Resources Ltd, a parent company that recently reclaimed ownership of one of the largest copper mines in the world from the Zambian government.
Many proxy advice companies and investors questioned the group’s intention to potentially utilize the proposed sale to reduce its mounting debt after Agarwal, the chair of the Vedanta Group, uncharacteristically expressed his opinions.
The return of Konkola Copper Mines (KCM) to Vedanta Resources came at an opportune time, according to Agarwal’s post on X on Tuesday. It possesses some of the greatest copper and cobalt reserves in the world, which is crucial for the shift to clean energy. In the future, I believe we should make the most of the synergies between KCM and Vedanta Ltd’s refinery and smelting operations in the UAE and India. At the appropriate price, KCM can be transferred from Vedanta Resources to Vedanta Ltd.
When asked whether the company had hired an adviser for the planned purchase, a corporate spokeswoman flatly declined to comment. Other than the information already supplied, he said, there is nothing else to say.
According to experts, the owner may have thought about the deal due to Vedanta Resources’ mounting debt problems, which are situated in the UK. Shriram Subramanian, the founder And MD of InGovern Research Services, a proxy advice business, stated that the promoter is attempting to divest Konkola Copper Mine to Vedanta due to the debt payment burden on Vedanta Resources. He is considering purchasing it from his listed entity rather than selling it to a third party because it would be possible to do so at a favorable price.
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Three weeks have passed after Agarwal posted a three-minute video that was turned in to the BSE on August 25. The 69-year-old stated in the video that he planned to separately list the operations of the mining group. “Investors prefer pure-play (businesses),” I was informed. Our entire business can expand greatly. I asked all of my advisors and associates to research whether we could have our items managed independently and who could expand this business. You will own many shares of numerous other firms if you own just one share of Vedanta Ltd., he continued.
As of June 30, all 68.1% of Agarwal’s ownership in Vedanta Ltd. was committed to creditors, despite the company accruing $13 billion in debt. According to JP Morgan, this year would be “critical for Vedanta Resources” because of debt maturities and interest payments of around $4.1 billion that are due for the parent in FY24.
Investor unease over the company’s capacity to pay off its debt has sent Vedanta’s shares down 27% since January, while the NSE-50 is up 10%.
Agarwal has rejected any worries about liquidity by claiming that his mining operations will generate $9 billion in profit in 2023–2024.
Agarwal demanded earlier this year that Hindustan Zinc Ltd buy THL Zinc, the group’s zinc operation in South Africa, for $3 billion. However, it was unsuccessful because the Centre objected to the proposed deal’s use of funds from the former state mining company.
Vedanta, which owns 64.9% of HZL, is currently negotiating the transaction’s approval with the government, which holds a 29.5% stake in the business.
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Revenue for Vedanta in FY23 was $1.45 trillion, an increase of 10.8% from the $1.31 trillion recorded for the year ending March 2022. But the company’s profits are hampered by excessive operating costs. It posted a net profit of £14,506 billion, down from £23,709 billion in FY22.
Copper is Vedanta’s third-largest business sector, raking in?17,491 crore in revenue last year, behind aluminum and zinc, which together account for 36% and 26% of the company’s total revenue. The remaining firms were in the oil, gas, iron ore, and steel industries.
Earlier this month, the mines were turned back over to Vedanta Resources, which owns 79.4% of Konkola Copper Mines and is owned by the Zambian government-controlled ZCCM Investments Holdings Plc, which controls 20.6% of the firm. The former Zambian President Edgar Lungu’s administration declared the mines in Zambia under provisional liquidation in 2019, sparking a slew of legal disputes by accusing Vedanta of lying about expansion plans and tax payments.
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