**Vedanta Ltd’s Demerger Approved by NCLT Amidst Government Concerns**
The National Company Law Tribunal (NCLT) has granted Vedanta Ltd the green light to proceed with its proposed demerger of its Indian operations, despite opposition from the Ministry of Petroleum and Natural Gas. The Mumbai bench of the NCLT announced the approval on Tuesday, although the official written order has yet to be released.
The bench, consisting of Justices Nilesh Sharma and Charanjeet Singh Gulati, had reserved its decision in November following extensive hearings regarding Vedanta’s application for regulatory clearance for the demerger. A spokesperson for Vedanta expressed that this approval is a significant step in the company’s transformation into focused, sector-leading entities with clear strategic goals and dedicated capital structures. The company is now set to implement the necessary steps for the demerger.
The petroleum ministry had raised several objections during the proceedings, citing concerns about potential financial risks associated with the restructuring, alleged misrepresentation of India’s hydrocarbon assets, and insufficient disclosure of liabilities. These objections posed a significant challenge to the proposed demerger.
One of the ministry’s primary concerns was related to Malco Energy Ltd, a Vedanta subsidiary that would become a separate entity post-demerger. The ministry highlighted that Malco is facing serious liquidity issues, reporting a negative net worth of ₹94 crore as of March 31, 2024, along with cash losses of ₹85.64 crore in FY24 and ₹244 crore in FY23. The ministry warned that Malco could potentially face liquidation, complicating the recovery of government dues.
Additionally, the ministry pointed out a long-standing dispute regarding Vedanta’s RJ oil and gas block in Rajasthan, noting that a significant portion of the company’s debt is tied to government claims related to this block. The ministry argued that Vedanta has not adequately disclosed these liabilities in its demerger scheme.
The dispute involves a partial arbitral award concerning ₹5,600 crore in dues owed to the government, which the ministry claims has been overlooked. This amount pertains to the government’s disallowance of costs and the reallocation of common costs among fields in the oil block, with the matter currently pending before the Delhi High Court.
In response to the ministry’s objections, Vedanta contested the claims, stating that it had already received approval from the Securities and Exchange Board of India after revising its demerger scheme to meet regulatory standards. Vedanta further argued that while the ministry serves as a sectoral regulator, it is neither a creditor nor a stakeholder in the company, thus lacking the standing to oppose the scheme before the tribunal.
**FAQ**
**What is the significance of Vedanta’s demerger approval?**
The approval of Vedanta’s demerger is a crucial milestone in the company’s strategy to streamline its operations into focused entities, despite facing regulatory challenges and concerns from the Ministry of Petroleum and Natural Gas.