Vedanta drops restructuring plan

Anil Aggarwal-promoted Vedanta Resources today dropped its proposed restructuring plan announced a fortnight ago following adverse investor feedback.

Anil Aggarwal-promoted Vedanta Resources today dropped its proposed restructuring plan announced a fortnight ago following adverse investor feedback. The Rs 8,800-crore metal and mining major took a U-turn in its Board meeting citing global financial market turmoil.

Reacting to the news, the shares of Sterlite Industries extended gains to nearly 15 per cent to close at Rs 518. Its shares had dropped almost 22 per cent since September 9 when the company said it planned to reorganise its business into three units: copper and zinc-lead, aluminium and energy, and iron ore.

According to the restructuring scheme, Sterlite Industries, the flagship company of the group, would have sold its 51 per cent stake in Bharat Aluminium Company Balco and a 29.5 per cent stake in Vedanta Aluminium Company to Madras Aluminium Company Malco, another subsidiary of Vedanta Resources. Besides, Sterlite also planned to sell its stake in the power business subsidiary, Sterlite Energy SEL, to Malco.

Certain investors, however, felt that the restructuring would dilulte the value of Sterlite shareholders. The restructuring was seen as effectively increasing the stake of promoters in businesses such as zinc and aluminium, while bringing down their stake in the copper business.

Vedanta had, however, maintained that the restructuring was in direct response to shareholder requests to simplify the current corporate structure and eliminate conflicts of interests. 8220;In view of the recent changes in global financial markets and investor feedback, Vedanta has decided not to pursue the proposed group restructuring. Vedanta remains committed to simplifying and streamlining its corporate structure in the interests of shareholders,8221; the company said in a statement. According to a report, a UK-based hedge fund, the Children8217;s Investment Fund TCI, was contemplating legal action against Vedanta over its recast plan on the ground it was skewed against minority shareholders, but benefiting the promoters.

Vedanta Resources also announced plans to invest 9.8 billion to become the world8217;s fifth-largest aluminum producer. The company will raise annual smelting capacity to almost 2.6 million metric tonne by 2012. It plans to build an aluminum smelter and a power plant in Orissa.

The big no8226; According to the proposed revamp plan, Sterlite Industries would have sold its 51 per cent stake in Balco

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8226; The restructuring was seen as increasing the stake of promoters and undermining that of shareholders

8226; Vedanta had said the restructuring was in response to requests to simplify the current corporate structure

8226; In view of the recent changes in global financial markets and investor feedback, the company has now decided not to pursue the proposal