Billionaire Anil Agarwal is exploring an overhaul of his lucrative Indian zinc unit that could split out its three core businesses, as part of the wider Vedanta group’s efforts to reduce a multibillion dollar debt load.
(Bloomberg) — Billionaire Anil Agarwal is exploring an overhaul of his lucrative Indian zinc unit that could split out its three core businesses, as part of the wider Vedanta group’s efforts to reduce a multibillion dollar debt load.
Hindustan Zinc Ltd. said in a statement that it could create separate legal entities for its zinc & lead, silver, and recycling businesses to help capitalize on “distinct market positions” and attract investors. A committee of directors will evaluate the options and advise the board, along with external advisers.
Shares of Vedanta Ltd., which controls the zinc business, jumped as much as 7.9% in Mumbai after the news, while Hindustan Zinc climbed as much as 6.6%.
Bloomberg News reported earlier this week that Agarwal’s Vedanta Ltd. was preparing a broad overhaul, with businesses including aluminum, oil and gas, iron ore and steel to be separately listed — an effort that could put better price tags on some assets and pave the way for Agarwal to hive off low-growth operations to raise cash.
Read More: Vedanta Said to Prepare Major Revamp to Tackle Debt Burden
“Agarwal’s efforts remind me of the phrase rearranging the deck chairs on the Titanic,” said Amit Tandon, managing director and founder of proxy advisory firm Institutional Investor Advisory Services India Ltd. “Capital allocation decisions in the operating companies are being driven by the debt in the holding company and the need to service this.”
The Indian government, which owns almost 30% of Hindustan Zinc, would need to consider the changes and the impact on the entity’s debt, he said.
Efforts to simplify a complex financial structure and to reduce a deep conglomerate discount have been floated by the group in the past, including in a video posted in August, but have not previously come to fruition. A heavy debt load has increased the urgency of those plans, though. Vedanta Resources Ltd., the parent of Vedanta Ltd., has $2 billion of bond repayments due in 2024 and another $1.2 billion in 2025.
(Updates with analyst comment in paragraph 5 and 6)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.