The ambitious plan of billionaire Anil Agarwal to split the Vedanta group into five listed entities faces a rocky ride ahead and may miss the revised September-end deadline.

First unveiled in 2023, the plan involves hiving off its businesses into independent, pure-play listed entities spanning aluminium, oil and gas, power and steel with Vedanta as the holding company. Initially, the process was expected to be completed by 2024-end. It was then postponed to March only to be revised to September.

Apart from a legal tangle in the split of business, Vedanta emerging as the winning bidder for acquisition of the bankrupt Jaiprakash Associates complicates matters. However, the ₹17,000 crore bid of the company is yet to be ratified by the lenders.

Vedanta has to pay ₹3,800 crore upfront, with the remaining spread annually over the next five years. The deal, if approved, exposes Vedanta to unrelated businesses such as real estate, cement, and infrastructure segments, which tend to be more cyclical, volatile and working capital intense.

“The sectors differ sharply from Vedanta’s core metals and mining operations, with distinct business drivers and limited operational overlap. We are watchful of new venture execution risks too,” said credit research firm, CreditSights.

Sharp focus

Vedanta’s proposal was intended to simplify its sprawling corporate structure, sharpen management focus and unlock shareholder value.

According to Vedanta’s demerger scheme, every Vedanta shareholder will receive one additional share in each of the newly demerged companies on the completion of the demerger process.

The currently listed Vedanta entity will hold over 63 per cent of Hindustan Zinc, the second largest integrated producer of zinc and the third largest producer of silver in the world, and Zinc International, which has even greater mineral resources than Hindustan Zinc.

Proposing the demerger plan, Agarwal had said “I have always found that trees that grow under the shade of a giant banyan tree often find it difficult to grow. But once you take them out and allow them to grow under the sun, they show remarkable growth and progress. Vedanta is like that banyan tree”.

Agarwal emphasised that Vedanta shareholders have already seen their investments multiply over 4.7 times in five years, with the company delivering an 81 per cent dividend yield, the highest among its peers.

The strategic move was intended to unlock shareholder value, attract investors seeking pure-play opportunities and foster significant growth, with each demerged entity having the potential to become a $100 billion company.

He believes this restructuring will enable independent management and give focus to drive business expansion in critical mineral sectors, aligning with growing global demand for resources needed in a low-carbon future.

In the last three years, Vedanta has been on a deleveraging spree, having lowered net debt from $8.9 billion to $5 billion as of March-end, and aims to reduce it further to $3 billion by FY27. The parent company, Vedanta Resources has been leading this effort through strategic financial actions such as refinancing, capital market transactions including equity fund-raising and NCD issuances to cut high-cost debt and strengthening operational performance to boost cash flow.

Approval hurdle

The plan has managed to received shareholders, lenders, exchanges and capital market regulator SEBI before moving the NCLT for its approval.

Initially, NCLT rejected the plan citing lack of proper disclosure of material debt to a creditor, Sepco Electric Power Construction Corporation.

The NCLT noted that Vedanta’s power unit, Talwandi Sabo Power (TSPL) excluded SEPCO from the approval process even after having debt exposure of ₹1,251 crore and claimed that it will defeat SEPCO’s right as an unsecured creditor.

However, the National Company Law Appellate Tribunal subsequently granted an interim stay on the NCLT’s order in May, a move that provided relief to Vedanta.

Last Friday, TSPL, a wholly-owned subsidiary by Vedanta, entered into a settlement deal with Chinese firm SEPCO Electric Power for the resolution of all long-standing disputes relating to the EPC contracts entered between the parties for setting up of a 3x660 MW thermal power project.

Without disclosing the financial details of the settlement, Vedanta said the settlement agreement provides for a full and final resolution of all claims and counter claims and includes withdrawal of pending arbitration proceedings. The settlement clears one of the major hurdles for Vedanta’s demerger.

This apart, SEBI had issued an administrative warning to Vedanta in August for altering its scheme of arrangement after receiving a no-objection certificate from exchanges, without seeking its explicit written consent.

SEBI cautioned Vedanta that repeat violations would attract enforcement action under the SEBI Act, and directed the company to place the warning before its Board and report corrective steps.

Last month, the Ministry of Petroleum and Natural Gas objected to the restructuring plan on concerns on concealment of crucial information, potential inflation of revenues and undisclosed liabilities, which could impede its ability to recover outstanding dues under production and revenue-sharing contracts linked to the company’s oil and gas business.

In response, Vedanta offered a corporate guarantee in favour of the Petroleum Ministry once the scheme became effective. This guarantee, Vedanta said, would cover potential contractual liabilities of Malco Energy, the unit that would house its oil and gas operations post-demerger.

Down but not out

Despite the ongoing complications, the legal fraternity is confident that the demerger process will be completed but with considerable delay.

Shankey Agrawal, Partner, BMR Legal, said the Government’s objections are unlikely to completely derail Vedanta’s demerger, but they can certainly slow it down.

The NCLT is unlikely to clear the plan until it is fully assured that Government dues from the oil and gas business are fully protected and this effectively means that the September deadline looks difficult, he said.

SEBI’s objection stems directly from a significant change in its scheme, wherein Vedanta decided to retain its base metals business under Vedanta, reducing the number of listed companies post split to five instead of six as proposed initially, he added.

The change was made after initial regulatory clearances and without prior written consent from SEBI. Regulators view such changes as needing fresh approvals, so a cautionary notice was issued, said Agrawal.

Sonam Chandwani, Managing Partner at KS Legal & Associates, said the Vedanta demerger is unlikely to be outright stalled merely on account of a government objection, since the scheme is already before regulators and courts under the Companies Act framework, but the process could face delays and heightened scrutiny.

The trigger of SEBI’s warning was not on the concept of demerger but the manner in which Vedanta altered its scheme documents reportedly with clear provisions on debt allocation and ring fencing of liabilities across the demerged entities, she said.

Subsequent filings were modified in a way that either diluted these safeguards or created opacity regarding how liabilities would be apportioned, thereby raising investor protection concerns, Chandwani said.

Vedanta attracted SEBI’s intervention because any change in financial covenants, disclosure standards or debt segregation will materially prejudice creditors, minority shareholders, or bondholders and goes to the heart of regulatory oversight, she said.

Notwithstanding the delayed process, a focused oil and gas company will have a better opportunity to step up exploration and increase domestic output, which directly supports the Petroleum Ministry’s energy security goals, said an oil and gas analyst.

The government will ultimately gain from higher revenues and job creation, while investors will benefit from further clarity and the opportunities ahead, he said. For now, all stakeholders await with bated breath.

Published on September 15, 2025