Vedanta Demerger: Five New Companies by March 2026

Introduction

Oil-to-metals conglomerate Vedanta Ltd is advancing with a plan to demerge its businesses into five separate, publicly listed companies. Chairman Anil Agarwal has set a target completion date of March 2026 for this strategic overhaul, which aims to unlock value by creating focused, pure-play entities. The move, approved by the National Company Law Tribunal (NCLT), is designed to allow each business to pursue its own growth trajectory and attract sector-specific investors.

The Rationale for Demerger

Anil Agarwal has often used the analogy of a "big Banyan tree" to describe Vedanta's current structure, suggesting that individual businesses struggle to grow in the shade of the parent company. The demerger is intended to move these businesses "out into the sun" to achieve their full potential. This strategy aligns with the global trend of large resource companies operating as specialized, pure-play entities. By separating its diverse operations, Vedanta aims to provide investors with clearer investment opportunities and enable each management team to focus on its core strengths. The vision, as stated by Agarwal, is to create "five more Vedantas."

A New Corporate Structure

The demerger will result in five distinct listed companies. The existing Vedanta Ltd will be restructured to house the base metals business, including its significant stake in Hindustan Zinc. The other four new entities will be:

• Vedanta Aluminium
• Talwandi Sabo Power
• Vedanta Steel and Iron
• Malco Energy

For existing shareholders, the transition is straightforward. For every one share held in Vedanta Ltd, investors will receive one equity share in each of the four newly demerged companies. This ensures that current shareholders retain their stake across the entire portfolio of assets, but through separate, more focused listed entities.

Managing Debt and Capital Allocation

A key aspect of the restructuring involves managing Vedanta's existing debt of approximately ₹48,000 crore. This debt will be allocated to each demerged entity based on its individual cash flow generation and balance sheet capacity, rather than being split equally. This approach ensures each new company starts with a sustainable level of debt. Agarwal has emphasized that the company's leverage is manageable. Post-demerger, each entity will have an independent board and professional management, with promoters holding around a 50% stake. The culture of aggressive capital expenditure and regular dividend payouts is expected to continue.

Ambitious Expansion Across Verticals

The demerger is a catalyst for aggressive growth across all business verticals. Vedanta has outlined significant expansion plans for each of the new entities. In aluminium, the company plans to double its capacity from the current 3 million tonnes, supported by captive mines and greenfield projects. This will position Vedanta as one of the top three non-Chinese aluminium producers globally. The silver business is set for a sharp increase in output, targeting 3,000 tonnes from the current 700 tonnes to meet rising domestic demand. Zinc production is also slated for a significant increase. In the oil and gas sector, Vedanta aims to raise production to 300,000 barrels per day in the short term, with a long-term goal of reaching 1 million barrels per day. The iron and steel business will focus on producing green steel with a proposed capacity of 10-15 million tonnes, while the power business targets a capacity of 20,000 MW.

Navigating Regulatory Pathways

While the demerger has received crucial approvals from shareholders, creditors, and the NCLT, the timeline has been extended to March 2026 to accommodate pending procedural requirements. The company has faced scrutiny from the Ministry of Petroleum and Natural Gas (MoPNG), which raised concerns about disclosures. However, Vedanta's leadership remains confident that these are procedural hurdles rather than fundamental roadblocks and is working to address all regulatory concerns.

Market Impact and Shareholder Value

The core objective of this demerger is to enhance shareholder value. By creating focused businesses, Vedanta believes it can attract a wider range of investors interested in specific commodities. This improved clarity is expected to lead to better price discovery for each business. Anil Agarwal has expressed a vision for each demerged company to potentially grow into a $100 billion enterprise. The company's performance in fiscal 2025, with record revenue of ₹1.5 lakh crore and an EBITDA exceeding ₹40,000 crore, provides a strong foundation for this growth.

Conclusion

Vedanta's demerger into five separate entities is a pivotal moment in its corporate journey. The move is a strategic bet on the power of focus, aiming to unlock the full potential of its diverse asset base. By creating independent, pure-play companies, Vedanta is positioning itself to capitalize on India's growing demand for natural resources while providing greater transparency and value to shareholders. The path to the March 2026 completion involves navigating final regulatory approvals, but the strategic direction is clear: to build a constellation of industry-leading companies from a single conglomerate.