Vedanta to invest $5 bn in fab project

New Delhi: Billionaire Anil Agarwal said his Vedanta group will invest $5 billion in the first phase of setting up a semiconductor fab, a packaging and testing unit, and a display unit.

The capital allocation for the project will involve a combination of debt and equity, Agarwal said in an interview. “We will be structuring it, because it will now be with the main company Vedanta Ltd, and Vedanta has a good cash flow. We will make a capital allocation in Vedanta. There is a queue of people to give us equity and debt,” Agarwal said.

The chairman of the mining conglomerate said his group was in discussions with three separate technology providers for each manufacturing unit, and he expects the first chip from the fabrication unit to be produced in 2.5 years.

“We’re talking to three companies for separate tie-ups for foundry, chips, and packaging and testing. They should happen in a few months. The first chip will be produced in two-and-a-half years,” Agarwal said.

The total investment for the project will be in the range of $19 billion-$20 billion. Agarwal emphasized that his company’s relations with Taiwanese contract manufacturer Foxconn were cordial, adding their partnership will continue in other areas of the semiconductor ecosystem despite the split of their joint venture for setting up the semiconductor fab, packaging testing unit, and display fab units.

“Our association with Foxconn will be there as an ecosystem; so whatever is their strength, we’ll bring them in, but on the foundry, they don’t have a licence,” he said, adding that Foxconn was not in the semiconductor business and that they were more into downstream manufacturing.

He also said that the group was well-positioned to address its debt situation, which stood at $6.5 billion as of May 2023. “We have a $7 billion profit, and there’s no company that works without debt. There hasn’t been a default to date, so we’re very comfortable addressing our debt. In fact, we have the lowest debt in our peer group,” he said.

Vedanta’s debt ballooned to $16 billion as of March 2022, after which it embarked on a debt reduction drive to become a zero-debt company in two-three years.

Agarwal also confirmed that the group was evaluating the sale of its iron ore and steel assets, as reported by Mint earlier this month.

“We’ve taken the view that we will take a review on this asset because, unless we are number one, two or three in any of my business, we can look at an exit. We have started the process, and this is also in the pipeline. We can look at it,” Agarwal said.