Vedanta to carve out real estate, create sixth listed company

Mumbai: Vedanta Ltd said on Thursday it will demerge its newly formed real estate company into a separately listed entity, creating a sixth listed group company. The billionaire Anil Agarwal-led company made the announcement just weeks after it completed a lengthy restructuring into five separately listed companies.

“This is yet another exciting announcement from Vedanta. After the recent success of the five-way demerger creating ‘pure-play’ entities across oil and gas, aluminium, power and steel, we plan to demerge the surplus real estate assets into an independent ‘pure-play’ company to unlock significant value for the stakeholders,” Agarwal said in a statement.

Shareholders of Vedanta Ltd will get a share of Vedanta Property Platforms Ltd for every 20 shares in Vedanta Ltd. Shares of Vedanta Ltd closed 1.17% higher on Wednesday at ₹267.6 compared to a 0.35% rise in the benchmark Sensex.

The company will inherit 14 land parcels and eight residential and office spaces across Gujarat, Maharashtra, Goa, Karnataka and Tamil Nadu. However, the assets are discrete, comprising five flats in Mumbai, two bungalows in Panjim, and several industrial land parcels.

The company proposes to use these assets for uses like offices, real estate investment trusts, hotels, and residential and corporate leasing.

“Vedanta is primarily a natural resources company, and separating the real estate business allows it to have its own independent management and operations,” said Suman Kumar, analyst at brokerage Philip Capital.

Robust earnings show

The five companies declared through Wednesday and Thursday their first quarterly results since demerger, reporting a cumulative 44% growth in revenue and 144% growth in profit, as per Mint’s calculation.

The original Vedanta Ltd, which now retains the group’s zinc, copper and ferrochrome businesses, and Vedanta Aluminium Metal Ltd led the pack in terms of revenue and profitability.

Vedanta Ltd reported revenue of ₹24,205 crore during the quarter, a growth of more than half over the same period last year. Its profit grew by nearly three-quarters to ₹5,473 crore.

The aluminium company, meanwhile, reported revenue growth by nearly a half to ₹21,105 crore and more than tripled profit year-over-year to ₹5,629 crore.

Among the remaining three companies, Vedanta Power Ltd reported a loss of ₹423 crore compared to a profit of ₹88 crore last year. Vedanta Oil and Gas Ltd and Vedanta Iron and Steel swung to profitability from a loss last year. The oil and gas company reported a profit of ₹945 crore from a loss of ₹103 crore, and the iron and steel showed a profit of ₹122 crore compared to a ₹142 crore loss a year ago.

“Vedanta Group's strong earnings growth was largely driven by its aluminium business, which benefited from higher aluminium prices, increased production volumes and a weaker rupee,” Phillip Capital’s Kumar said.

“The group’s overall performance was also supported by the inclusion of Hindustan Zinc, whose robust profitability flowed into Vedanta's standalone results as it remains a subsidiary of the company. The steel arm also reported a profit on the back of strong steel and pig iron prices,” he said.

The companies had a combined market capitalization of ₹3.2 trillion on Thursday compared to the ₹3 trillion value the undivided Vedanta Ltd had in late April just before the demerger. However, the companies’ combined value today is significantly higher than the ₹82,000 crore market value the undivided Vedanta Ltd had when the demerger was first announced in September 2023. Over this period, benchmark Sensex has appreciated by just under a fifth.

“Vedanta’s demerger is unlocking significant shareholder value, with combined market cap of resulting companies growing by over ₹71,000 crore in the (first) quarter,” said Ajay Goel, group chief financial officer, Vedanta.