Anil Agarwal, the mining tycoon, has suggested that his publicly traded company Vedanta Ltd acquire Konkola Copper Mines from parent Vedanta Resources Ltd, which has regained control of one of the world’s largest copper mines from the Zambian government.
After Agarwal, the Vedanta Group chair, in an uncharacteristic move, shared his views, many proxy advisory firms and investors raised questions on the group’s intention to potentially use the proposed transaction to repay its rising debt.
On Tuesday, Agarwal’s post on X said: “The return of Konkola Copper Mines (KCM) to Vedanta Resources comes at a perfect time! It has one of the largest reserves of copper and cobalt in the world, important in energy transition…Going forward, my thought is that we must maximize the synergies between KCM and Vedanta Ltd’s refining/smelter businesses in the UAE and India. KCM can be moved from Vedanta Resources to Vedanta Ltd at the right valuation.”
When contacted a company spokesperson refused to offer any clarification on whether the company had appointed an adviser for the proposed deal. “There is nothing more to add, other than the shared information,” he said.
Experts said the rising debt challenges faced by UK-based Vedanta Resources may have prompted the owner to consider the deal. “The debt servicing overhang on Vedanta Resources means promoter is trying to divest Konkola Copper Mine to Vedanta,” Shriram Subramanian, the founder and managing director of InGovern Research Services, a proxy advisory firm, said. “Instead of selling it to a third party, he is looking at his listed entity to buy it because it could be done at a favourable valuation.”
Agarwal’s tweet come three weeks after a three-minute video he posted, which was submitted to the BSE on 25 August. In the video, the 69- year-old said he intended to independently list the businesses of the mining conglomerate. “I was told that investors like pure-play (businesses). All our business can grow manifold. I asked all my advisers and people to look into if we can have our products under independent management and who can grow this business. If you have one share of Vedanta Ltd, you will have many shares of many other companies,” he added.
Agarwal’s entire 68.1% stake in Vedanta Ltd is pledged with creditors as of 30 June even as it piled up $13 billion in debts. Debt maturities and interest of about $4.1 billion are due for the parent in FY24, according to JP Morgan, which believes this year will be “critical for Vedanta Resources”.
Doubts over the company’s ability to service the debt have made investors jittery, dragging Vedanta’s shares down by 27% since January, at a time the NSE-50 is up 10%.
Agarwal has dismissed any liquidity concerns stating that his mining business, together, is expected to post $9 billion in profit in 2023-24.
Earlier this year, Agarwal wanted Hindustan Zinc Ltd to acquire THL Zinc, the group’s zinc business in South Africa, for $3 billion. But it failed after the Centre expressed unhappiness over the cash from the former state mining firm being used for the proposed deal.
Vedanta, which owns 64.9% of HZL, is currently in discussion with the government, that owns 29.5% in the company, to green-light the transaction.
Vedanta reported ₹1.45trillion in revenue in FY23, up 10.8% from ₹1.31 trillion in the year ended March 2022. But high operating expenses hurt the firm’s profits. It reported net profit of ₹14,506 crore, a dip from ₹23,709 crore in FY22.
Aluminum and Zinc are the two of the largest businesses for Vedanta, bringing 36% and 26% of revenue, respectively, while copper is the third largest business division, accounting for ₹17,491 crore in revenue last year. Oil and gas and iron ore and steel businesses accounted for the remaining business.
The Zambian government-owned ZCCM Investments Holdings Plc, which owns 20.6% in Konkola Copper Mines, returned the mines to Vedanta Resources, which owns 79.4% in the company, earlier this month. The Zambian mines were placed under provisional liquidation in 2019 by the former Zambian President Edgar Lungu’s administration, who accused Vedanta of dishonesty about expansion plans and tax payments, initiating a series of legal battles.