Vedanta demerger faces setback as govt flags risks before NCLT; shares fall 4%

The Mumbai bench of the National Company Law Tribunal (NCLT) on Wednesday deferred the hearing on Vedanta Ltd’s proposed demerger amid reports that the government has doubled down on its argument against the Anil Agarwal-led company's demerger plans .

The Mumbai bench of NCLT also directed Vedanta and the ministry to file written submissions in five days.

According to a CNBC-TV18 report, the government flagged concerns about financial risks after the demerger, inadequate disclosure of liabilities, misrepresentation of hydrocarbon assets, and possible violation of market regulator SEBI’s disclosure requirements.

"As a regulator and a creditor, it is my duty to bring all these facts before the tribunal to show that whether the scheme is clear or it is opaque. We are asking for disclosures on the RJ-ON-90/1 Oil and Gas Block, an operating oil and gas block in Rajasthan. We are asking for clear disclosures," the counsel representing the Ministry of Petroleum and Natural Gas told the tribunal.

Responding to the ministry's assertions, Vedanta submitted that all creditors and stakeholders have approved the demerger and also expressed willingness to provide corporate guarantees to ensure the government's dues are protected.

Shares of Vedanta tanked nearly 4% on Wednesday but recouped some losses, trading at around ₹455.55 apiece at the close.

The development follows the National Company Law Appellate Tribunal (NCLAT) earlier this week setting aside an NCLT order that had rejected a demerger plan filed by Vedanta group firm Talwandi Sabo Power Ltd.

Vedanta had filed a scheme of arrangement before NCLT Mumbai bench covering four group companies - Vedanta Aluminium Metal, Talwandi Sabo Power, Malco Energy, and Vedanta Iron and Steel - along with their shareholders and creditors.

The Ministry of Petroleum and Natural Gas had objected to Vedanta's proposed demerger.

Earlier on August 20, the tribunal had deferred the hearing on the Vedanta demerger to September 17 as SEBI was yet to complete the scrutiny of the proposal, while the Petroleum and Natural Gas Ministry had raised certain objections and sought time to present its observations on the scheme.

The Securities and Exchange Board of India (SEBI) has raised no objections to the scheme, though it sought further details on the proposed base metals carve-out. That particular carve-out is no longer part of the current plan, after Vedanta revised its original blueprint.

The company had initially proposed splitting its businesses into six firms — Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals, and Vedanta Ltd.

However, the plan was later revised, with the base metals unit being retained under the parent company.

Vedanta Ltd was expecting to complete the demerger of its businesses by September-end after pushing back its plan by a quarter.