The National Company Law Appellate Tribunal (NCLAT) has cleared the way for Talwandi Sabo Power Ltd’s (TSPL) demerger from India-listed Vedanta Ltd, said Deshnee Naidoo, chief executive officer of the group’s London-based parent Vedanta Resources. Separately, the group expects progress when the National Company Law Tribunal (NCLT) hears the ministry of petroleum and natural gas’ (MoPNG’s) objections to the demerger on 17 September.

MoPNG is concerned that the scheme could impede its ability to recover government dues linked to production and revenue-sharing contracts with the company’s oil and gas business. Other issues include non-disclosure of liabilities, possible inflation of revenues within the demerger scheme, and alterations to the scheme after receiving regulatory clearances.

“We continue to work with MoPNG and Directorate General of Hydrocarbons (DGH)…We are hoping that (NCLT hearing) will be a step forward,” Naidoo told Mint. The group is confident of meeting NCLT’s requirement given that Vedanta’s shareholders and creditors had largely approved the demerger scheme in February, and the proceedings in the tribunal are procedural, she said.

Read more: Vedanta gets NCLAT nod for Talwandi Sabo’s demerger as creditor dispute ends

“…The timelines for demerger are merely moving because of the court cases, but the end milestone is very much in sight for us,” Naidoo said, without giving a specific timeframe for completing the demerger.

After granting Vedanta a no-objection certificate, Sebi also issued an administrative warning about modifying the demerger scheme without prior consent. Vedanta has said that the letter is cautionary and does not impose any financial or operational restrictions. The company is cooperating with the regulator and will furnish the board’s comments on it.

Vedanta group plans to split its India unit into five independent, listed businesses: Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Iron and Steel, and the restructured Vedanta Ltd that will house the zinc and silver businesses (Hindustan Zinc) and act as an incubator for new technology and business opportunities. The company’s demerger aims to unlock value, provide investor flexibility for sector-specific investments, and allow for focused growth strategies within each business unit.

The group also faced investor scrutiny after American short-seller Viceroy Research released a report on 9 July, a day before Vedanta Ltd.’s annual general meeting, accusing parent Vedanta Resources of draining cash from India-listed unit by forcing it to declare dividends far beyond its free cash flow. The group denied the allegations. Former chief justice of India DY Chandrachud, in his legal opinion to Vedanta, had said that the Viceroy report “lacks credibility”.

Naidoo told Mint that the conglomerate is ready for the demerger. “What we have done in the last 25 to 30 years, most companies try and do it in a couple of generations,” Naidoo said.

What we have done in the last 25 to 30 years, most companies try and do it in a couple of generations
—Deshnee Naidoo

“It’s very logical that you will now consolidate into these five vertical instruments that make a lot of sense. All of these have producing assets with the growth story that has a unique appeal to different investors, absolutely the right thing to do for us and for the country,” Naidoo said. “And post demerger, from day one all our existing investors will be present in all the new entities.”

She added that most of the demerged entities will have existing assets, which will support cash flows and growth. Accordingly, the group’s overall debt will stay at the asset level.

Paring debt

Naidoo said that the debt-to-Ebitda ratio of demerger entities would be 1.2x to start with, but with growth plans under each entity being executed, these cash flows and revenues would reduce debt and bring the ratio in the range of 1x soon. Ebitda or earnings before interest, tax, depreciation and amortization is a measure of operating profitability.

Vedanta’s net debt stood at ₹53,251 crore in FY25 versus ₹58,338 crore the year before. The group plans is to cut debt by $0.6 billion (about ₹5,286 crore) in FY26 and further by $0.7–$0.8 billion (around ₹6,166 – ₹7,047 crore) in FY27 to hit the target of 1x.

Read more: Vedanta’s parent refunded part of brand fee amid ED scrutiny, says Viceroy

The reduction will primarily come through the parent, Vedanta Resources, which aims to cut its liabilities by $2 billion over two years. It has already slashed its debt by nearly $4 billion—from $9 billion in FY22 to $4.9 billion in FY25.

Expansion spree

Naidoo said that Vedanta announced an investment of over $9.5 billion a couple of years ago to expand its aluminium, zinc, iron ore, oil, and power operations. It has added another $1 billion of fresh investment to expand Hindustan Zinc’s capacity to 2 million tonnes.

Around $6 billion has already been spent largely to scale up aluminium production and alumina refining. The balance will go into strengthening its aluminium and zinc businesses and pushing up the production of critical minerals, largely from 10 blocks it secured from the government under the auction process.

Vedanta Ltd is also anchoring aluminium at the centre of its growth strategy, with an expansion plan that will take capacity to 3.1 million tonnes per annum (MTPA) by FY28. Aluminium, the world’s second-most-consumed metal after steel, is becoming increasingly critical to electric mobility, renewable energy, urban infrastructure, and aerospace.

Aluminium demand in India is expected to grow at 6-7% annualized rate through 2030, outpacing global averages, according to CRU and S&P Global data. Globally, aluminium demand could rise more than fourfold by 2050, driven by renewable energy, making it the fastest-growing metal by consumption.

Mega aluminium bet

Vedanta, India’s largest aluminium producer with over 50% domestic share, wants to ensure that the metal remains the single biggest contributor to its targeted $8–10 billion group Ebitda by FY28, according to its recent exchange filing.

The company has earmarked ₹29,860 crore for aluminium expansion, of which ₹16,634 crore has already been spent, while the remaining ₹13,226 crore will be invested over the next few years.

Read more: Breaking up to grow: Vedanta’s demerger and its impact on investors

Vedanta’s aluminium capacity will expand from the current 2.4 million tonnes per annum (mtpa) to 2.75 mtpa by FY26, and further to 3.1 mtpa by FY28. This will place it among the world’s top three aluminium producers outside China, ranking alongside global peers such as RUSAL, Rio Tinto, Emirates Global Aluminium and Alcoa. Balco, in which Vedanta holds a majority stake, is also set to enter the 1 million tonne club, reinforcing the group’s leadership.

The mining major is also focusing on reducing its aluminium cost of production by nearly 24%, or $641 per tonne, over the past 11 quarters, aided by backward integration across alumina with the expansion of the Lanjigarh Refinery and coal mines.

The company is already positioned in the first quartile of the global aluminium cost curve; with expansions, it aims to move into the top decile globally, according to the filing. Captive resources are central to this strategy: Vedanta is ramping up captive bauxite and coal mining by FY29.