Vedanta has initiated a review of its steel business, potentially leading to a stake sale, according to the Economic Times report on Tuesday. To explore options for the business, which has an annual capacity of 1.5 million tonnes, the company has enlisted the services of investment bank Credit Suisse.
In order to reduce its debt burden, Vedanta has faced pressure to deleverage its balance sheet, and selling the steel business could help achieve this objective. As of March 2023, the company’s net debt amounted to $11.3 billion.
The steel market in India is currently grappling with overcapacity, resulting in downward pressure on prices. This may pose challenges for Vedanta in finding a buyer for the business at a favorable price. However, the company also has the option to restructure the business or prioritize its core mining operations.
If Vedanta proceeds with a sale of the steel business, it would mark a significant departure for the company, as it has been actively involved in the steel industry for more than a decade. In 2018, Vedanta acquired a 90% stake in Electrosteel Steels and has since made substantial investments in the business.
It is still too early to determine the outcome of the review. Nevertheless, the consideration of a stake sale by Vedanta indicates the company’s willingness to explore new possibilities for its steel business.
