MAC: Mines and Communities

Vedanta May Offer Swap To Sterlite Shareholders

Published by MAC on 2004-02-24
Source: The Hindu

Vedanta may offer swap to Sterlite shareholders

Mumbai, The Hindu

February 24 2004

Indian investors may soon be able to own shares of Vedanta Resources Plc, the LSE-listed holding company of the $981-million Sterlite group.

The mining and metals major is planning a medium-term exchange of Sterlite shares listed on Indian stock exchanges with that of Vedanta, which recently collected about $1 billion through a global IPO, Mr Brian Gilbertson, Chairman of Vedanta Resources, told newspersons here.

Mr Gilbertson said that the company was working on how its ownership could be offered to Indian investors. He said they could be given a choice of holding Vedanta shares in exchange of equity holding in Sterlite Industries that also owns controlling equity stakes in Hindustan Zinc, Balco and the 1.4-mtpa alumina project in Orissa. Vedanta shares should be more valuable because it also owns the other assets of the group such as Malco.

A company official told Business Line that the exchange could be either through an issue of Indian Depository Receipts or by a simple swap of Sterlite shares with those of Vedanta.

Even though the Government has in-principle approved issue of IDRs by foreign companies, a regulatory framework for it is yet to be put in place. Similarly, even though the Government has allowed Indians to invest in listed foreign companies that have a listed Indian subsidiary, it is yet to issue clear guidelines for such investments.

"We would do it as soon as there is regulatory clarity on IDRs or the international swap," the official said. Meanwhile, Sterlite has just completed a one-for-one share bonus issue and a three-for-10 rights is underway. The price of the issue has yet to be announced but Vedanta had earlier said that it would use funds it raised through the IPO to subscribe to the rights.

Vedanta debuted on the London Stock Exchange in December at a price of £3.9 per share but currently trades at about £3.6 a share. Even though the global IPO of the company was oversubscribed five times, it could manage a price only towards the lower end of the book-building band. The share has never really recovered from the lows that it touched immediately after listing.

Mr Gilbertson said the share price was depressed after the Indian Government slashed duties helping imports to compete with domestic products. Litigation against the Government's privatisation programme also affected Vedanta shares. He, however, insisted that overseas investors were yet bullish on the `India story', especially about the prospects of the mining and minerals industry.


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