‘Not right time for Vedanta to restructure’

Mumbai: Experts have expressed concerns on reports of Vedanta going ahead with the restructuring plan, especially in the present volatile market conditions. Anil Agarwal, chairman of Vedanta Resources plc was reported saying to a news agency that the group plans to resume the task, aimed at re-aligning its structure into three commodity-focused verticals, by the year-end. “This will be a very bad time for Vedanta to go ahead with its restructuring plans. For one, the market conditions are not favourable and second, there is uncertainty on commodity prices,” say analysts. Vedanta wanted to reorganise its corporate group structure into three commodity-focused verticals: copper and zinc-lead (Sterlite Industries), aluminium and energy (VAL and Sterlite Aluminium) and iron ore (Sesa Goa). Moreover, Sterlite would demerge its aluminium and energy business to Malco and Vedanta would transfer its 79.4% equity interest in Konkola Copper Mines to Sterlite. However, citing financial turmoil and investor’s feedback, the metal and mining company had dropped its restructuring plans in two weeks’ time after it announced the plan on September 9, 2008. When contacted, Tarun Jain, CFO of Sterlite Industries declined any news of the group going ahead with the restructuring. Meanwhile, Agarwal was reported saying that the group would go ahead with the restructuring plans despite the market conditions being unfavourable and would stick to the same plan. The nitty-gritties of the same would be reworked. Sterlite Industries shares on Tuesday slipped 1.57% to close at Rs 238 on the Bombay Stock Exchange. Experts believe that it would not be in the favour of the group to go ahead with the same restructuring it had done earlier as previously there were concerns and objections from investors of Sterlite Industries that the company’s profitability may be affected by its decision to demerge its arm to Malco. The restructuring would have taken the sheen out of Sterlite, as aluminium and energy were the two most effective and profit making businesses it had, hitting the company’s margins. “Also, the transfer of 79.4% equity in Konkola Copper Mines to Sterlite was not of much significance as it is a low margin business and was overvalued,” said a Mumbai-based analyst. Hence, it would be risky for the group to go ahead with the restructuring in the current scenario.