India-focused miner group dropped its restructuring plans on the last minute facing opposition from the shareholders coupled with the frail picture of the market.

Anil Agarwal-owned Vedanta Resources on Wednesday planned to split itself into three units that focused on the commodities it produces: copper, zinc and lead; aluminium and energy; and iron ore. The LSE (London Stock Exchange) -listed resource major had announced its major restructuring plan on September 9.  

The move however would have simplified the metals major’s business in India and also defined its holdings in growth areas but the Chairman Anil Agarwal explained his move by saying that “We found that some of our shareholders had mixed reactions to the restructuring” also "In view of the recent changes in global financial markets and investor feedback, Vedanta has decided not to pursue the proposed group restructuring," a statement said.  "However Vedanta remains committed to simplifying and streamlining its corporate structure in the interests of all shareholders." 

Under the restructuring plan, Vedanta’s unit, Sterlite Industries, was to transfer its aluminium and power businesses to Madras Aluminium Company (Malco), and Vedanta was to transfer its 79.4% in the Zambian copper entity Konkola Copper Mines to Sterlite.  Vedanta, which earlier this month announced plans to boost aluminium output more than sixfold, will not postpone any of its capital expenditure plans, Chairman Anil Agarwal told an Indian television. 

The firm previously said it planned to spend $9.8 billion to increase Aluminium capacity to 2.6 million tonnes by 2012, making it the world's fourth-biggest producer after Rio Tinto's Alcan, the company s Chairman contended that they have $6.5 billion of cash and company is generating enough profit, at this time they were comfortable pursuing their projects. 

Sterlite would have issued one equity share in exchange of one equity share in Konkola Copper Mines. In the final stage, investors in Malco would have got one Sterlite share for every 51 they held in Malco. The scheme was also opposed on the grounds that it was designed to give tax and regulatory advantages rather than any strategic benefits. 

The shareholders were of the viewpoint that the move benefited promoters more and brought a relatively unknown African mining asset into the Indian shareholders’ fold.“It is a wise decision on the behalf of the management,” said Rakesh Arora, a metals analyst with Macquarie Securities. “Minority shareholders have been unhappy that the copper mines in Zambia were to be merged with Sterlite at a higher valuation.”   

Under the scheme, small investors of the company would have got 21.44% stake in Konkola Copper Mines, post restructuring would have given promoters a greater say in the consolidated aluminium and energy businesses — two high growth areas for the company — which is now seeing a sharp fall in copper and zinc prices.  
While it is easier to estimate an average 85% plant load factor in the energy sector in India, the copper business, especially in a period of falling prices, is uncertain. Because when prices are down, reserves of mines also come down as the feasibility of mining lower grade copper, also falls.  

Most fund managers didn’t expect the stock to rebound to the level seen prior to the restructuring announcement. Shares in Indian-listed Sterlite, in which Vedanta owns 80 percent, jumped as much as 15 percent and were trading 9.2 percent stronger at 491.50 rupees. The rebound was attributed after the company shelved its restructuring plans, to covering of short positions, which were created when the proposal was announced.