Vedanta’s demerger faces setback as SEBI approval clashes with NCLT obstacle

In a critical development in Vedanta’s ongoing corporate restructuring efforts, the Securities and Exchange Board of India (SEBI) has granted approval for the company’s proposed demerger documentation. Nevertheless, the demerger has encountered a fresh hurdle due to recent changes within the National Company Law Tribunal’s (NCLT) Mumbai bench.

SEBI’s green light regarding Vedanta’s demerger documentation is a significant milestone in the company’s restructuring initiative. This approval paves the way for Vedanta to proceed with its intended corporate reorganization, subject to securing requisite regulatory nods and managing any legal obstacles ahead.

Initially, the demerger plan presented earlier in the year encompassed four of Vedanta’s group entities: Vedanta Aluminum Metal & Mining Company Limited, Talwandi Sabo Power Limited, Malco Energy Limited, and Vedanta Iron & Steel Limited, along with their respective shareholders and creditors. However, the Ministry of Petroleum and Natural Gas (MoPNG) expressed reservations about the proposal, seeking more information on specific disclosure and contractual aspects.

The company’s original strategy involved dividing its operations into six distinct entities, covering aluminum, oil & gas, power, steel & ferrous materials, base metals, and a parent company overlooking all segments. With the updated framework, the base metals division will remain under the parent company, a deviation from the initial blueprint.

In March, Vedanta extended the deadlines for concluding the demerger until September 2025, citing delays in obtaining necessary approvals from the NCLT and other governmental entities. Presently, with the alterations within the NCLT bench, the demerger process’s completion timeline may face further delays.

Following the reconstitution of NCLT’s Mumbai bench, Vedanta’s demerger case will undergo reassessment by a new panel at the forthcoming meeting on November 12. This impending hearing will revisit the company’s proposed scheme of arrangement, providing the ministry with another opportunity to articulate objections and concerns.

The NCLT decided on October 8 to postpone the hearing on Vedanta’s demerger proposal to October 29. Previously, on September 17, the Mumbai bench had deferred the case to October 8, directing Vedanta and the Ministry of Petroleum and Natural Gas (MoPNG) to submit written statements within five days.

Previously, on August 20, the tribunal had delayed the hearing to September 17 due to SEBI’s review of the proposal and the petroleum ministry’s need for additional time to address its concerns and share thoughts about the scheme.

Vedanta’s legal team informed NCLT that SEBI has endorsed the company’s updated demerger plan. This approval follows SEBI’s earlier caution notice highlighting concerns related to disclosures and compliance.

The impending NCLT ruling holds immense significance for the Indian aluminum giant’s demerger strategies. Investors and market observers are closely monitoring the developments as they could significantly impact the company’s corporate structure and overall market valuation.

Moving forward, stakeholders anticipate greater clarity regarding the demerger specifics and implications for shareholders. Therefore, they must stay abreast of updates from the company and relevant regulatory institutions.