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Vedanta selling steel business and foraying into semiconductors

Vedanta approves second interim dividend of Rs 11 per share for FY24

Vedanta Limited, a multinational corporation based in Mumbai, plans to sell Electrosteel Steels Ltd in order to concentrate on its core mining and industrial operations. Four years after buying and reviving Electrosteel Steels Limited, Vedanta Group intends to sell the company in order to focus on its core domain and deleverage its balance sheet, which had a debt of $11.7 bn as of March end. Vedanta has approached various steel makers, including Tata Steel, Arcelor Mittal Nippon Steel, and JSW, as well as some investors, according to sources.

After creditors drove the faltering steelmaker into bankruptcy proceedings, Vedanta beat out Tata Steel to acquire Electrosteel for Rs 5,320 crore in December 2018. Vedanta won the bid as a successful resolution applicant by CoC under the Insolvency and Bankruptcy Code, 2016. Electrosteel Steels projected capacity in 2018 was 2.51 million tonnes, with a commissioned capacity of 1.5 million tonnes. Vedanta had begun expanding in Bokaro and Goa, as well as constructing a greenfield project in Bellary, Karnataka.

Vedanta planned to invest $4 billion in Electrosteel to enhance its capacity from 1.5 to 7 million tonnes per annum. Vedanta Group, which has a portfolio that includes oil and gas, zinc, and aluminium, to mention a few, owns 95% of Electrosteel. Vedanta Resources, headquartered in London, is Vedanta Limited's parent company. Aggarwal's family investment firm, Volcan, controls 100% of Vedanta Resources.

Moody's Investors Service downgraded Vedanta's corporate family rating from 'B2' to 'B3' on October 31, citing the holding company's persistently poor liquidity profile. Following that, on November 3, Vedanta dropped Moody's as a rating agency. “VDL paid a dividend of Rs 51 per share in the first half of 2022-23, which has resulted in a debt reduction of $1.4 billion (to $8.3 billion) at the parent VRL level. At VDL level, the net debt increased by $0.5 billion quarter-on-quarter to $3.9 billion. The company has also revised down its capex guidance from $2 billion to $1.6 billion for 2022-23, primarily on the back of reduced capex in the aluminum segment,” said Pinakin Parekh, an analyst with JP Morgan.

Vedanta Resources is entering the semiconductor manufacturing business. Anil Agarwal, founder, and chairman of Vedanta Resources Limited said during Vedanta's 57th Annual General Meeting that the business aims to enter the Indian semiconductors sector, which is expected to be worth $110 billion by 2030. Semiconductors and displays are critical to establishing India as an electronics hub, which would help encourage suppliers and device assemblers to set up shop in India. The Indian semiconductor industry was valued at $27.2 billion in 2021, and it is expected to grow at a 19% CAGR to $64 billion by 2026. Vedanta look to begin producing 28-nanometer chips, which are the most commonly used in India, by 2026 and to generate around 60,000 units per month.

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