Vedanta intends to exit the steel business and is looking to sell electro steel
Vedanta Group, led by Anil Agarwal, is reportedly exiting the steel business almost four years after deciding to go big in it. Vedanta intends to sell Electrosteel and focus solely on its core businesses of mining and industrial production. Vedanta has approached other steel companies, including Tata Steel, ArcelorMittal Nippon Steel, JSW, and Jindal Steel and Power Limited, as well as some investors.
One of the reasons for Vedanta decision is reportedly to deleverage its balance sheet, which had $11.7 billion in debt at the end of March. While neither of the mentioned companies agreed to comment, the company did not currently have any acquisitions under consideration. Vedanta beat out Tata Steel to acquire ESL for Rs 5,320 crore in the summer of 2018. While Electrosteel was originally a subsidiary of Electrosteel Castings, Vedanta delisted the company after acquiring it. Vedanta also stated at the time of the acquisition that this acquisition is expected to help its iron ore business because vertical integration of steel manufacturing capability has the potential for great efficiency.
Investors Service downgraded Vedanta corporate family rating (CFR) and senior unsecured bonds issued by the indebted VRL. Furthermore, Vedanta Group confirmed that they are prioritizing the expansion of Electrosteel Steels Ltd, despite rumors that the Anil Agarwal-led company is exiting the steel business. Vedanta Group stated that they are prioritizing the company’s expansion from 1.5 million to three million tonnes. Electrosteel Steels was acquired four years ago by the Anil Agarwal-led Vedanta Group. The mining conglomerate planned to sell Electrosteel Steels Ltd in order to focus on its core mining and industrial businesses.
As of now, this (exiting Electrosteel) is not a topic for us; our only priority is to increase (production) capacity to 3 million tonnes of the company exiting the steel business. He was at the Global Mining Summit 2022, which was organized by the CII. Out of the USD 2 billion investment announced by the group, the group planned to invest USD 300-350 million in doubling Electrosteel capacity. During the day, he advocated for regulatory flexibility in the mining industry. Earlier, Anil Agarwal explained why they chose Gujarat over Maharashtra and advised that their decision should not be turned into a political squabble. Vedanta Resources Ltd chairman Anil Agarwal said at the event that his company would make a larger investment in a downstream facility in Maharashtra, which would become an important part of the company’s forward integration plan.
Maharashtra will build one of the largest downstream, larger than Gujarat. This will happen, the Vedanta CEO said in response to a question about what swung the event in Gujarat’s favor. Vedanta Group announced a $20 billion (1.54 trillion) investment plan for its Gujarat chip and display facility in September 2022. While the investment plan was welcomed for its potential to transform the country’s semiconductor manufacturing, it sparked controversy because it did not occur in Maharastra, which had initially proposed to facilitate such investment.