Vedanta Demerger: A New Twist
The National Company Law Tribunal, Mumbai, has deferred the hearing on Vedanta Ltd.’s proposed demerger after objections were raised by the Securities and Exchange Board of India (SEBI) and the central government. The matter will now be heard on September 17.
According to sources, SEBI informed the tribunal that Vedanta had made changes to the scheme of arrangement without disclosing them to the regulator or getting any prior permission. The market watchdog then issued an administrative warning letter dated August 13 to the company.
SEBI’s Concerns
The said letter will soon be placed on record before the company law tribunal, the people in the know mentioned. SEBI’s administrative warning letter, addressed to Vedanta’s Company Secretary and Compliance Officer, notes that the company had modified its scheme of arrangement after receiving a no-objection certificate from the stock exchanges, without obtaining the regulator’s prior written consent as required under the regulator’s Master Circular dated June 20, 2023.
The regulator said it viewed the lapse seriously, warning Vedanta to ensure strict compliance in the future and cautioning that any repeat violation could invite enforcement action under the SEBI Act and related regulations.
Vedanta’s Response
Vedanta spokesperson, however, mentioned in a media statement, that SEBI has confirmed it has no further comments on the merits of the scheme, and it had issued an administrative cautionary letter over a procedural lapse. This letter carries no financial or operational restrictions, and the matter has already been disclosed by the company.
The company has received NOCs from stock exchanges on the modified scheme. As per people privy to the issue, the letter was also sent to deter other market regulated entities from following such practices.
Government’s Concerns
The government also flagged concerns, stating that Vedanta had allegedly concealed certain liabilities in connection with the demerger proposal. These submissions prompted the tribunal to adjourn the matter for further consideration.
Vedanta Group is currently undergoing proceedings to get the regulatory approvals to demerge into four listed entities. These are to focus on aluminium, power, gas, oil and base metals. These plans were first announced in September 2023.
Previous Controversies
It is interesting to note that the Vedanta Group recently faced heat due to a Viceroy research report against its conduct. The Delaware-based short seller’s report had made allegations against the group, of using a “bait and switch” strategy to raise debt, alleging that the company misrepresented its financial position.
It claimed that Vedanta was inflating its capital expenditure numbers and that the group’s actual debt burden was much higher than what was officially disclosed. The report further argued that dividend payouts from Vedanta to its parent company, Vedanta Resources Ltd., were hurting minority shareholders, including the Indian government.
Implications for Investors
The deferment of the hearing on Vedanta’s demerger proposal has significant implications for investors. The company’s plans to demerge into four listed entities are expected to unlock value for shareholders, but the objections raised by SEBI and the government may delay the process.
Investors should keep a close eye on the developments in the case and the company’s response to the objections raised. The outcome of the hearing on September 17 will be crucial in determining the future of Vedanta’s demerger plans.
In the meantime, investors can stay updated with the latest news and developments in the Indian stock market. Our expert analysis and investment tips can help you make informed decisions and navigate the complex world of investing.