Vedanta set to merge Sesa Goa with Sterlite

Vedanta Resources Plc is giving the final touches to a merger of two of its Indian subsidiaries, Sesa Goa and Sterlite Industries, creating a Rs40,000-crore metals giant, according to several reports.

Cairn India too may be impacted by the restructuring, CNBC-TV18 points out. If Sterlite becomes the holding company for Vedanta's Indian operations, it will end up owning 58.8 per cent in Cairn.

The announcement is likely on a day when the London-listed Vedanta and the ADRs as well as the Indian-listed subsidiaries are not trading. So it could possibly be on a weekend.

This has been done keeping Vedanta Resources Plc debt in mind, particularly after the Cairn debt. To service the debt, Vedanta Resources Plc needs cash up-streaming from the subsidiaries. So you would see higher dividend payouts from subsidiaries all through this year so that Vedanta Resources can meet the $550 million requirement to service the interest.

Moody's has already downgraded Vendanta's bonds to Ba3 from Ba2 last month after the Cairn acquisition. Moody's also noted that Vedanta has made sporadic attempts to try and reduce the debt concerns, but nothing major has happened. So this will be the major move in that direction.

Moreover, Vedanta has said recently that it is in talks with government to buy out Balco. For that, it will need $3 billion. Also, it has its own huge expansion programmes. Hence gross debt could rise to as high as $17-18 billion.