VedantaNSE -1.00 % Group expects the acquisition process for the debt-laden Electrosteel SteelsNSE -2.63 % (ESL) to be completed in the next couple of weeks, paving way for entry of the non-ferrous metals and oil conglomerate into steelmaking through Vedanta Star, a wholly-owned subsidiary.
The National Company Law Appellate Tribunal (NCLAT) stayed the ElectrosteelNSE 4.14 % acquisition on an appeal by Renaissance Steel earlier this week. However, on Thursday, Vedanta said a Steering Committee (comprising members from Vedanta and lender banks) will continue operations at the debt-stricken company.
Vedanta Resources, the parent company of Vedanta, has called a shareholders’ meeting on May 18 to seek their approval for the acquisition.
“The NCLT Kolkata bench had approved the acquisition. While the appeal is being heard by the appellate court, we hope the matter will be settled in a couple of weeks,” Vedanta CEO Kuldip Kaura said, responding to ET’s query during a conference call to announce the company’s results.
“A steering committee, comprising members of Vedanta and the lender banks, will run the company’s operations in the interim,” he said. NCLAT will hear the case next on May 17.
According to Vedanta officials, shareholder approval for the acquisition and legal challenges against it are two separate processes that could run simultaneously, media reports said. In a notice to shareholders, Vedanta Resources PLC’ chairman Anil Agarwal said as per the resolution plan, Vedanta Star, a wholly-owned subsidiary of Vedanta will take 90% stake in Electrosteel for Rs 1,805 crore and provide additional funds of Rs 3,515 crore as debt.
Of outstanding dues of Rs 14,177.3 crore, unsustainable debt of Rs 7,618.24 crore would be converted into equity shares. Following change in Electrosteel’s share capital, Vedanta Star will subscribe for new shares for Rs 1,805 crore and lend it Rs 3,515 crore.
Vedanta Star will thus get 90% stake in Electrosteel and of the remaining 10%, 7.6% would be owned by the lenders and 2.4% by original promoters of the company.
While listing out the risks and delays involved, Vedanta said it expects “the outstanding consents will be obtained for the acquisition to close in the second quarter of 2018”.
Listing out the advantages of acquiring ESL, Kaura said: “We are a significant player in iron ore. ESL gives us an opportunity to increase our value-added portfolio. It is also a vehicle for our overall growth plans.”
While ESL will mark Vedanta’s entry into steel, it will remain a smaller piece of the overall business that will continue to be dominated by zinc, oil & gas, and aluminium, he added.
Improved volumes and better prices led to a 40% jump in Vedanta’s consolidated attributable net profit in Q4FY18 to Rs 3,956 crore, while revenues climbed 17% to Rs 27,630 crore. Ebitda rose 17% to Rs 7,929 crore. For FY18, Vedanta’s net profit went up 34% to Rs 9,561 crore, with revenues rising 22% to Rs 92,923 crore. Ebitda went up 19% at Rs 25,470 crore.
Vedanta is spending about $2-3 billion in oil & gas to double capacity in 2-3 years.
Source: Economic Times