Vedanta Aluminium listing plan on hold

Sustained protests from environmentalists and investors lead to a retreat, for now.

Call it second time unlucky. Billionaire Anil Agarwal’s Vedanta Resources has put its latest plan to hive off its aluminium business under Vedanta Aluminium on hold.

This comes after a sustained campaign from environmentalists, non-profit bodies and investors such as the Church of England, who have been opposing the company’s plans to mine bauxite in Orissa.

According to investment banking sources, London-listed Vedanta hired Morgan Stanley early this year to prepare the plan which would have seen Vedanta Aluminium getting listed.

This is the second time the group is having to put off a restructuring. Two years earlier, the group wanted to unbundle its aluminium, zinc, copper and mining businesses but back-tracked after facing opposition from institutional shareholders.

Big plans

The company, which has operations in Orissa, has a $7.8-billion （Rs 36,000 crore） investment plan that includes expanding its refining capacity at Lanjigarh to 5 million tonnes （mt） from the current 1 mt. And, expansion of the smelting capacity at Jharsuguda to 1.75 mt from the current 0.25 mt.

Group company Sterlite Energy is also coming up with a 2,400-Mw （4x660） power project in Orissa, while Vedanta was planning a 6,000-acre university complex, with a planned investment of Rs 15,000 crore. But the education project may also get shifted out of the state, as reported by Business Standard last week.

The company planned to part-finance the investment through an initial public offer. It has already raised a Rs 10,000-crore rupee debt from a consortium of Indian banks, led by State Bank of India and IDBI.

But all this depends on its plan to mine bauxite from the Niyamgiri hills in the state, which is supposed to provide the raw material for making the base metal. It is facing road blocks in terms of getting environment clearance and support of the local people and that has impacted valuation of the company.

This despite the fact that in 2008, a Supreme Court bench chaired by the then Chief Justice, K G Balakrishnan, had allowed Vedanta to mine bauxite in the ecologically fragile Niyamgiri hills. A project which had then envisaged an investment of around $1 billion （Rs 4,600 crore）.

“The company does not see the environment supportive enough for an IPO since the protest from the investors and environmentalists rose on mining project in Orissa,” said a banker familiar with the development. The company did not respond to this newspaper’s queries.

Ecology barriers

The Stage-II environmental clearance from the Union Ministry of Environment and Forests for mining bauxite at Niyamgiri is still awaited. The clearance got delayed after the protests from environmentalists. The central government is also proposing a new mining bill, by which it wants to ensure that mining is more socially responsible and the people affected are rehabilitated. Niyamgiri tribals are also protesting, as they consider the hill sacred and worship it.

“Without the mining approvals, the company would not be able to fetch a good valuation for Vedanta Aluminium. Hence, the restructuring is postponed,” said the banker.

Group holding firm Vedanta Resources has 70.5 per cent stake in Vedanta Aluminum. The other 29.5 per cent is held by group subsidiary Sterlite Industries. Upon completion of the expansion, the company is expected to become Asia’s largest integrated producer of aluminium. It will also become one of the top five aluminium producers worldwide.