Vedanta besieged

Monday, 3 March, 2014

Further to all the to-do in Zambia we’ve picked up on in recent months, it looks like there’s more trouble brewing for Vedanta in India. 

It’s neatly summed up over on Mines and Communities (MAC) in a posting entitled “Vedanta on the ropes as scandals build and shares fall":

“[Vedanta] has been accused of making payments to Indian political parties which are illegal, since it's based in the UK.


Vedanta's supremo Anil Agarwal has [also] been making sizeable purchases of the company's stock. Whether this is an attempt to stem the flow of capital out of the company as its share price falls, or a bid to turn the company private. [sic]

That would almost certainly cut off some funding, but enable him to avoid much of the regulatory scrutiny that keeps coming his way.”

On the latter point, the take home message may be this, as reported by Reuters:

“[Vedanta] grappling with regulatory hurdles and low commodity prices, was one of three miners to be demoted from the FTSE-100 index last year. Its stock has lost nearly a third of its value in the last 12 months.

Liberum analyst Ben Davis said that the latest purchases by Agarwal might be an attempt to signal to investors that Vedanta's stock has been oversold.

While promoters buying shares in their companies to shore up their stock price is nothing new, the frequency of Agarwal's purchases has prompted trader chatter that he may be looking to make an offer to take the firm private.


Taking the company private would severely restrict Vedanta's access to public funds. It would also clash with Agarwal's ambition of growing the company to compete with the likes of Rio Tinto and BHP Billiton.”

The other big news is that the Norway Government’s Pension Fund has excluded Vedanta subsidiary Sesa Sterlite from its fund for ethical reasons - having already divested itself of Vedanta proper for the same reasons back in 2007. In the words of an article in Norwegian e-newspaper The Nordic Page:

“Sesa Sterlite is a newly established subsidiary of Vedanta. The Council’s assessment is that the relevant operations in India, which are currently run through the company Sesa Sterlite, present an unacceptable risk of environmental damage and serious violations of human rights. The Council has regularly updated its assessment of Vedanta and the basis for exclusion is still considered to be present. The Ministry of Finance, in accordance with the Council’s recommendation, has decided to exclude Sesa Sterlite from the Fund’s investment universe, as well as to maintain the exclusion of Vedanta.”

Back in August, we brought you news of a landmark referendum and consultation process that took place in Odisha state with regard to a Vedanta bauxite development. We said we thought it might be a significant step in India figuring out how - in the context of slowing growth and major developments in citizens’ rights - to “balance the need for resources with a correct desire to democratise how communities allow land to be used with unlocking economic potential of resource assets.” It seems like a positive thing to be discussing; but as the MAC piece suggests, our feeds since then have seen little regarding Vedanta that’s positive. Here’s hoping for an upturn in that regard.