Synopsis: The shares of Vedanta Ltd were in the news today as the company took part in the hearing by NCLT discussing its demerger case.
This company, which is a diversified natural resource group engaged in exploring, extracting and processing minerals and oil & gas, along with business spread across various verticles had its shares in the spotlight as the company faced its hearing by NCLT regarding its demerger case.
Price Action
With the market cap of Rs 2,08,208 crore, the shares of Vedanta Ltd had hit its intraday high at Rs 535.60, gaining almost 3 percent compared to its previous day closing price of Rs 520.45; today’s high also marks its 52-week high. The shares have given a return of more than 400% over the last 5 years.
About the Demerger Case and Hearing.
Vedanta Ltd wants to break its businesses into separate companies, but the government is pushing back, saying the split will leave fewer assets to recover what the company owes. They believe the demerger will make recovery more difficult. Vedanta owes the government for two reasons; one is for evading mining royalties, and the other is for the dispute over revenue share over its oil and gas block.
The government argued that before the demerger, Vedanta had a huge asset base of over Rs 2 lakh crore, which gave them enough confidence that their Rs 16,700 crore claim could be recovered. But once the company is split, the Oil & Gas arm would be left with assets of just Rs 29,000 crore, making it much harder for the government to secure its dues. They also said Vedanta hasn’t mentioned several arbitration cases that could potentially cost the company anywhere from $222 million to $1 billion.
Vedanta, however, said the government’s claim is already much larger than what the oil & gas business is worth, so the demerger doesn’t really change that reality. The company also added that it doesn’t need to report arbitration claims until a court officially confirms them.
Keeping this case in mind, NCLT, which is the National Company Law Tribunal, gave a “Reserved” judgement after market hours on Wednesday which basically means that the tribunal has heard both the parties and the final judgment will be declared later, but have not mentioned the dates for the same.
Commenting on this, a Vedanta spokesperson has stated, “The Mumbai Bench of the Hon’ble National Company Law Tribunal (NCLT) today completed hearings on the Vedanta demerger scheme and the MoPNG application and has reserved the matter for orders. Vedanta remains committed to the proposed demerger, which aims to create independent, sector-specific entities across aluminium, oil and gas, power, and iron and steel.”
Vedanta is a global natural resources company and a key supplier of metals that power the world’s clean-energy future. It is one of the largest integrated zinc producers, a major player in silver and aluminium, and India’s only private oil and gas producer. The company is also one of the country’s biggest private power generators.
Written by Leon Mendonca.
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