Indian Government Challenges Vedanta’s Demerger Plans Amid Concerns

The Indian government has formally opposed the proposed demerger of mining giant Vedanta into four separate companies, citing concerns over its ability to recover outstanding dues. According to a report from CNBC-TV18, the objections were raised during a hearing at the National Company Law Tribunal (NCLT), where the government accused Vedanta of altering its demerger plan after obtaining a no objection certificate from the Securities and Exchange Board of India (SEBI).

During the tribunal session, government representatives argued that the changes made to the demerger scheme could obstruct efforts to reclaim financial obligations owed by Vedanta. The NCLT is tasked with adjudicating corporate matters, and its ruling will have significant implications for the company and its stakeholders.

Vedanta has responded to the government’s concerns, stating that it has filed a comprehensive reply but has not disclosed specific details. The Ministry of Mining and the Ministry of Petroleum and Natural Gas did not provide comments in response to requests from Reuters. The exact amount of dues in question remains unspecified, but Vedanta has indicated that it will issue a corporate guarantee for its subsidiary, aimed at facilitating the recovery process.

The government, through its legal representation, has alleged that Vedanta failed to disclose critical information related to the demerger, including claims of “inflated revenues” and “concealed liabilities.” This allegation adds to the scrutiny surrounding the company’s restructuring plans.

Earlier this month, Vedanta disclosed that it received a warning letter from SEBI regarding certain compliance issues but did not directly address the government’s allegations in its public statements.

On the financial front, Vedanta’s stock experienced a decline, dropping by as much as 2.8 percent during the trading session following the news of the government’s objections. The shares later recovered slightly, closing at 445.50 rupees, down 1 percent on the day.

The NCLT has scheduled the next hearing for September 17, 2023, marking a critical date for Vedanta as it seeks to navigate governmental scrutiny and proceed with its restructuring strategy. The outcome of these proceedings will be closely monitored by investors and industry analysts alike, as it could significantly impact Vedanta’s operational future and financial standing within the market.