Another setback for Vedanta after Petroleum Ministry’s objection
SEBI has also issued a warning to the billionaire Anil Agarwal-owned company over compliance issues
Yet again, Vedanta Ltd’s plan to split into six listed entities has faced a roadblock after the Mumbai bench of the National Company Law Tribunal (NCLT) adjourned the hearing to 17 September.
The NCLT postponed the matter after the Ministry of Petroleum and Natural Gas (MoPNG) objected to the restructuring. It stated that the proposed breakup could impair its ability to recover dues owed under production and revenue-sharing contracts linked to the firm’s oil and gas business.
Though Vedanta’s counsel submitted a counter-response, he was unable to conclude arguments, prompting the adjournment.
The company sought to reassure the NCLT by offering a corporate guarantee in favour of MoPNG once the scheme became effective. The guarantee would cover potential contractual liabilities of Malco Energy Ltd (MEL), the unit that would contain its oil and gas operations post-demerger.
The spokesperson for Vedanta said, “This is in the event MEL is unable to meet or satisfy potential contractual liability, if any, towards MoPNG arising under the production sharing contracts and revenue sharing contracts. We remain committed to delivering long-term value to shareholders and stakeholders.”
Meanwhile, the Securities and Exchange Board of India (SEBI) has issued a separate warning to the billionaire Anil Agarwal-owned company over compliance issues.
The market regulator said, the company altered its scheme of arrangement after receiving a no-objection certificate (NOC) from exchanges, without seeking SEBI’s written consent as mandated under its master circular. Flagged by the Bombay Stock Exchange (BSE), the breach was described as a ‘serious’ lapse.
SEBI cautioned Vedanta that repeat violations would attract enforcement action under the SEBI Act. It directed the company to discuss it with the Board and report corrective measures.
Meanwhile, Vedanta has explained that SEBI had not opposed the demerger, evident from its 16 July affidavit, which stated that the tribunal could proceed.
The company’s spokesperson added, “SEBI’s letter is cautionary and does not impose any financial or operational restrictions.”
The twin challenges faced by Vedanta underscore the rising scrutiny on its restructuring.
Unveiled in 2023, the plan involved branching its businesses into six independent, pure-play listed entities – aluminium, oil and gas, power, steel, base metals, and Vedanta Ltd. The move is meant to simplify its sprawling corporate structure, sharpen management focus and unlock shareholder value.
However, the restructuring is widely seen as critical to the financial health of Vedanta Resources Ltd, the London-based parent company, owned by Agarwal.
By creating standalone listed entities, Vedanta hopes to provide investors direct exposure to its high-growth businesses while enhancing flexibility in fundraising and debt management. But the objections from the Ministry and the market regulator signify uncertainty in the timeline.
Meanwhile, analysts felt that regulatory pushback could prolong the process, but the company is confident of an eventual approval.
Recently, Vedanta faced another setback, after the Supreme Court ruled against its Talwandi Sabo Power Ltd unit in a contractual dispute with Punjab State Power Corp Ltd over customs duty benefits under India’s mega power policy.
However, the company stated the ruling was about slegacy (unrelated to the demerger) and legal options were being evaluated.
For a long time , Agarwal has pitched the breakup as a way to highlight Vedanta’s portfolio strengths. The coming months will be crucial for the firm, as the NCLT resumes hearings in September. On the other hand, with SEBI’s tightening norms, the group will have to convince stakeholders about the long-delayed demerger to materialise.