Mumbai, Feb 25 - In a bid to simplify operations and save costs, mining major Vedanta Resources Saturday proposed to consolidate its various subsidiaries into a single group company upon receiving regulatory approvals.
The company said in a regulatory filing to the Bombay Stock Exchange (BSE) that it proposes to merge aluminium major Sterlite Industries and iron ore producer Sesa Goa into one company -- Sesa Sterlite.
"Sesa Sterlite will be one of the largest global diversified natural resources majors, supporting the country's industrial growth. This transaction is a natural evolution, leading to simplification of the group's structure," Anil Agarwal, chairman of Vedanta Resources.
"Sesa Sterlite will be the principal operating company in the group and with its high quality assets, growth projects and strong management, it is well placed to create value for all shareholders."
According to the company, Sterlite would be merged into Sesa Goa, and for the new entity Sesa Sterlite the company will trade three Sesa Goa shares for every five existing Sterlite shares.
Vedanta Aluminium and Madras Aluminium would also be consolidated into Sesa Sterlite. Vedanta's direct holding of 38.8 percent in oil producer Cairn India would also be transferred to Sesa Goa, together with the associated debt of $5.9 billion, at cost.
Post the transfer, Sesa Sterlite will have a 58.9 percent shareholding in Cairn India. However, the group said its 79.4 percent holding in Konkola copper mines will continue to be held by Vedanta.
The consolidation process is expected to create the world's seventh largest global diversified natural resources major by earnings before interest, taxes, depreciation, and amortization (EBITDA) basis.
"The consolidation is expected to lead to significant operational, capital and corporate synergies, including economies of scale, leveraging technical expertise, more efficient movement of group cash, improved allocation of capital and corporate cost savings including tax efficiencies," the company said in a statement.
"These synergies are expected to generate cost savings of Rs.1,000 crore ($200 million) per annum. The consolidation is expected to be earnings accretive to Sesa Goa, Sterlite and Vedanta shareholders immediately post completion," the statement added.