Formerly - Angelchange Limited

Type - Private limited company

Industry - Mining

Founded - 22 April 2003 (19 years ago) as Angelchange Limited

 Founder - Anil Agarwal

Headquarters - Mumbai, India

Area - served Worldwide

Products -  Copper, Aluminum, Zinc, Lead, Gold, Iron ore, Pig iron, Metallurgical Coke and Oil
and gas exploration, Power

Type - Public company

Industry - Metal, Mining

Founded - 8 September 1975, Calcutta, India

Successor - Sesa Sterlite Limited

Area served - Worldwide

Parent - Vedanta Limited

Reasons

1. Vedanta Resources, which is listed in London, will merge all of its Indian
holdings, particularly Sterlite Industries and Sesa Goa, into a single entity.
2. Vedanta will hold 58.3 per cent in the new company.

3. The merge will entail a share swap in the 3:5 ratio, wherein five shares of
Sterlite will fetch three shares of Sesa Goa.

4. The new entity, to be named Sesa-Sterlite, will have a market

capitalization of about $22 billion, four billion more than the sum of the
individual firms’ market cap.

5. The merged company will have consolidated net profit of $2.5 billion.

6. Unlisted Vedanta Aluminium, Madras Aluminium and Vedanta's 38.8 per

cent holding in oil and gas producer Cairn India will also be transferred to
Sesa Sterlite, whose stake in the company will go up to 58.9 per cent. Cairn
India’s debt of $5.9 billion will also be transferred to Sesa-Sterlite.

7. Vedanta Resources will also issue American Depository Shares (ADS) in

the new company that will be listed on the New York Stock Exchange.

8. The restructuring does not include Vedanta’s African business – it holds

a 79.4 per cent stake in Konkola Copper Mines Plc in Zambia.

9. Sesa Goa is India’s largest privately-held producer and exporter of iron

ore, Sterlite Industries is India’s largest non-ferrous metals and mining
company.

10. The restructuring will come into effect only after some minority
shareholders and regulators in India and the UK give it their stamp of
approval.

Methods
FTSE-100 miner Vedanta, which has underperformed the sector by
more than 25 percent since the start of last year, has over a dozen
units, none fully owned and several separately listed, producing oil to
aluminium and copper to zinc.

The consolidation is expected to lead to significant synergies,

including economies of scale, more efficient movement of group cash,
improved allocation of capital and corporate cost savings including
tax efficiencies, Vedanta said.

“The restructuring was necessary, especially after the acquisition of

Cairn India, because it was a large acquisition and they needed to do
things in a much more organised way in India,” said Jagannadham
Thunuguntla, head of research at SMC Investments and Advisors in
New Delhi.

Vedanta said, as a first step, it will merge non-ferrous metals producer

Sterlite Industries into sister concern and iron ore miner Sesa Goa.

The boards of the companies have approved the issue of three shares
of Sesa Goa for every five shares held in Sterlite.

Its unlisted unit Vedanta Aluminium, along with Madras Aluminium

Co, will then be transferred to the merged company, to be named Sesa
Sterlite.

Vedanta’s 38.8 percent holding in oil and gas producer Cairn India,
which it acquired last year, will be transferred to Sesa Sterlite, along
with related debt of $5.9 billion.

Sesa Goa already holds 20 percent in Cairn India directly.

“On the face of it, the merger ratio is appearing to be slightly negative
to Sesa Goa shareholders and positive to Sterlite shareholders,”
Thunuguntla said. “...But on a long-term basis, this will prove to be
positive for the merged entity.”

The group’s holding in Hindustan Zinc and Bharat Aluminium Co

Ltd, in which the government also holds a part stake, will remain
separate of the merger.
After the share transfer, Sesa Sterlite would be listed in India and also
list American Depositary Shares in New York.

Vedanta, which will own 58.3 percent in Sesa Sterlite post-

restructuring, now controls about 55 percent each in Sterlite Industries
and Sesa Goa.

“This transaction is a natural evolution, leading to simplification of

the Group’s structure,” Vedanta Chairman Anil Agarwal said in a
statement. “Sesa Sterlite will be the principal operating company in
the group... and is well placed to create value for all shareholders.”

VALUE ACCRETIVE
This is the group’s second effort to overhaul its structure. A similar
exercise in 2008 was aborted after investor opposition to the plan and
the valuations of some of Vedanta’s African assets.

On Saturday, Vedanta sought to reassure its minority shareholders by

saying the restructuring will be earnings-accretive in the first year
itself.

The group expects cost savings of $200 million a year from the
restructuring, vice chairman Navin Agarwal told analysts in a
conference call, adding the transaction was expected to be earnings-
accretive in the first year itself.

Vedanta held $9 billion in debt by December 2011 and serviced

interest payments of about $500 million, but with the transfer of most
of its debt to Sesa Sterlite, yearly debt servicing for the parent would
fall to $180 million, Agarwal said.

Ratings agency Standard & Poor’s said ahead of Saturday’s

announcement, the group’s restructuring would improve its ability to
service its debt obligations, but may take time to implement as it is
subject to approval from a number of minority shareholders and
regulators in Britain and India.

Vedanta expects to close the restructuring in 2012, Navin Agarwal

said.
Cairn India, in which Vedanta acquired a majority stake late last year
in an $8.7 billion deal, will remain separately listed, given the
different valuation dynamics for oil and gas companies, its Managing
Director Rahul Dhir said in the conference call.

The cash-rich company is likely to decide on a dividend and a one-

time payout for shareholders within the next 2 to 3 months, he said.

Ahead of the announcement, shares in Sterlite, valued at $7.9 billion,

closed 3.1 percent higher in a weak Mumbai market on Friday. Shares
in Sesa, valued at $4 billion, closed down 0.2 percent.

Shares in Cairn India, valued at $14.8 billion, ended flat while

Vedanta shares closed up 4.5 percent in London trading.

INVESTMENT BANKERS

Vedanta Group companies Sterlite Industries and Sesa Goa have received their
shareholders’ approval for the proposed merger.
A total of 1,244 shareholders and creditors representing Sterlite Industries, Madras
Aluminium, Sterlite Energy, Vedanta Aluminium and Sesa Goa participated in the
voting procedure held at Panaji in Goa on June 19. Of them, 1,073 (representing
86.25 per cent) voted for the resolution to merge these entities and form a new
company Sesa Sterlite. Another 171 (13.75 per cent) were against the resolution,
while 13 others abstained from voting. Similarly, 861 Sterlite Industries investors
attended a meeting for getting shareholders’ approval for the merger plan. Of them,
703 (representing 81.65 per cent) investors were for the merger and 158 against it.
According to the merger proposal, Sterlite shareholders will get three shares of
Sesa Goa for every five shares held. Sesa Sterlite will become the seventh largest
diversified resources company in the world with business interests in iron ore
mining, copper, aluminium, zinc, lead, silver and oil and gas.
Earlier, the Competition Commission of India had approved the merger plan
proposed by the holding company Vedanta Resources. In February, the UK-based
Vedanta Resources had proposed to merge its Indian firms into a single entity Sesa
Sterlite and offload debt of $9 billion (Rs 45,000 crore).
Post-reorganisation, Vedanta Resources will own a 58.3 per cent in Sesa Sterlite. It
currently has 54.6 per cent in Sterlite and 55.10 per cent in Sesa Goa.
Vedanta Resources will also transfer its shareholding of 38.8 per cent in Cairn
India to the new entity along with the debt of $5.9 billion raised to acquire Cairn
India. Sesa Goa will pay a nominal consideration of $1 for buying Cairn India
stake. Post the transfer, Sesa Sterlite will have a 58.9 per cent shareholding in
Cairn India.

Valuation

To offload $9 billion debt onto new entity valued at over

$20 billion
The UK-based Vedanta Resources Plc will merge its Indian firms — Sesa Goa and
Sterlite Industries — into a single entity Sesa Sterlite and also offload debt of $9
billion (Rs 45,000 crore) on it. Under the merger, three Sesa Goa shares will be
issued for five Sterlite shares .
Vedanta will also transfer to the new entity its share holding of 38.8 per cent in
Cairn India along with a debt of $5.9 billion. Sesa Goa will pay a nominal
consideration of $1 for Cairn India acquisition. After the transfer, Sesa Sterlite will
have a 58.9 per cent shareholding in Cairn India. There will not be an open offer
for Cairn India shareholders as there is no change in promoters.
Two unlisted companies — Vedanta Aluminium and Madras Aluminium — will
be merged with Sesa Sterlite. The entire deal is expected to be completed in five-
six months after receiving shareholders, creditors and various regulatory approvals
in the UK and India.
Post the all-share deal, Vedanta Resources will own a 58.3 per cent in Sesa Sterlite,
while the promoter (Anil Agarwal family) will hold 63 per cent in Vedanta
Resources. Vedanta Resources holds 54.6 per cent in Sterlite and 55.10 per cent in
Sesa Goa.
Vedanta Resources will continue to hold 79.4 per cent shareholding in Konkola
Copper Mines in Zambia. Sesa Sterlite is expected to generate a revenue of Rs
66,431 crore and EBITDA (earning before interest, tax and depreciation and
amortisation) of Rs 24,953 crore. Attributable net income works out to Rs 10,971
crore. The gross debt on books will amount to Rs 66,717 crore and net debt Rs
36,936 crore. Given the average cost of funds at eight per cent, the total interest
outgo is expected at Rs 4,000 crore a year.
Economies of scale
Mr Anil Agarwal, Chairman, Vedanta Resources, said the merger will result in a
saving of Rs 1,000 crore a year on account of economies of scale, leverage of
technical expertise, better capital allocation and cash management and tax
efficiencies resulting in cost savings.
“The reorganisation will lead to creation of seventh largest global diversified
natural resources major with a potential to leap forward once the synergies are
tapped to the optimal,” he said.
On transfer of Vedanta Aluminium debt of $4 billion, Mr Agarwal said: “It should
be viewed in totality as we are also transferring an asset worth $10 billion. Once
the problem in getting bauxite from captive sources is resolved, the company will
become our flagship and the cherished asset of the country.”
Mr M.S. Mehta, Group CEO, said the consolidation will create value for all
shareholders and lead to a simpler and more efficient structure. It will facilitate
more flexible allocation of capital.
Mr Jagannatham Tunnuguntla, Head of Research, SMC Global Securities, said that
the merger appears to be in favour of Sterlite holders. On Vedanta Aluminium, he
felt it could cause concern among shareholders, due to its huge debt. Vedanta Plc
will be clear beneficiary as it can pass on the debt to Sesa Sterlite. Sesa Sterlite is
expected to have market cap upwards of $20 billion (about Rs 1 lakh crore).

Scheme

The High Court of Bombay at Goa approved on Wednesday the Schemes of

Amalgamation and Arrangement for creation of Sesa Sterlite.
Sesa Goa said the High Court, in an order dated April 3, approved the composite
scheme involving Sterlite Industries (India) Ltd, Madras Aluminium Co Ltd,
Sterlite Energy Ltd, Vedanta Aluminium Ltd and Sesa Goa Ltd and their respective
shareholders and creditors and the Scheme of Amalgamation of Ekaterina Ltd with
Sesa Goa Ltd and their respective shareholders and creditors.
The Ekaterina Scheme was earlier approved by the Supreme Court of Mauritius in
August last year. The composite scheme is also subject to the approval of the High
Court of Madras. Sesa Goa, the iron ore miner of the London Stock Exchange-
listed Vedanta Resources, said hearings in the Madras High Court were over and
the order was awaited.

regulatory aspects

Read more at:

http://timesofindia.indiatimes.com/articleshow/21884322.cms?
utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Challenges

The Centre on Monday moved the Supreme Court challenging the merger of two Vedanta
group companies iron ore mining unit Sesa Goa and copper producer Sterlite Industries
alleging that the amalgamation approved by the Bombay High Court in August last year was
aimed at avoiding taxes to the tune of Rs 847 crore.
While seeking the setting aside of the merger scheme, the ministry of corporate affairs
(MCA) said the relevant scheme of amalgamation was nothing but a colourable device
adopted by Sesa Goa, the once-flagship iron ore producer of Anil Agarwal-controlled
Vedanta Resources, to evade payment of tax, by being eligible for refund.
The Sesa Goa-Sterlite merger conducted in an all-share transaction led to the formation of
Sesa Sterlite, Indias biggest aluminium maker. As per the merger scheme, investors got three
Sesa Goa shares for five shares of Sterlite, while London-based Vedanta transferred to the
new entity for $1 its 38.8% stake in Cairn India, including debt of $5.9 billion. The scheme,
first announced in February 2012, has since received all other regulatory clearances and the
merged entity started trading on Indian bourses on August 30 last year.
A bench headed by justice Fakkir Mohamed Ibrahim Kalifulla posted the matter for further
hearing on Thursday, the day when an earlier the income tax departments appeal in a related
matter comes up for hearing.
The department had appealed against the Bombay HCs order that dismissed its intervention
application on the ground that it had no locus standi, and the Supreme Court then said any
objection would be entertained only if the MCA filed a special leave petition.
The ministry has now said that parent company Vedanta Aluminium had huge accumulated
loss/unabsorbed depreciation of Rs 2,461 crore whereas Sesa Goa had paid total taxes of Rs
846.97 crore for the financial year ended March 31, 2012. Therefore, the entire tax liability of
Sesa Goa was wiped, causing the total taxes of Rs 846.97 crore to be refunded at the expense
of the public exchequer, it added.
Senior counsel Harish Salve and Ranjana Roy, appearing for Sesa Goa, argued that the
ministry had filed objections that were never raised by it before the high court. Under Section
72A of the Income Tax Act, if there is any merger or demerger, the company can take refund
to set off the losses, they said, adding that the SC has already upheld the merger scheme on
August 27 after dismissing an appeal filed against the merger.
To support its contentions, the government has relied upon McDowell & Co. Ltd v CTO and
SRF Ltd vs Garware Plastics & Polyesters Ltd. The Centre stated that when an amalgamation
scheme is framed with the sole objective of deriving unjustifiable benefit like obtaining
refund of taxes paid earlier at the cost of the public exchequer, then such schemes are
considered to be colourable devices with the motive of evading payment of tax.
When the HC granted approval to the merger, it had rejected a review petition filed by a
shareholder of Sesa Goa and sanctioned the scheme of amalgamation and arrangement
amongst Sterlite Industries (India) and Sesa Goa.
Recast the deal
* In February 2012, Vedanta Resources proposes consolidation of Sesa Goa, Sterlite,
Vedanta Aluminium and Madras Aluminium into a single entity Sesa Sterlite
* Argues that the single-entity structure would lead to consolidation and simplification of the
group structure
* All-share merger of Sesa Goa and Sterlite Industries became effective on August 17, 2013,
to form Sesa Sterlite
* Vedanta claims contributing R31,100 crore to govt in FY14 in taxes, duties, royalties &
profit petroleum
* Sesa Sterlites tax outgo in FY14 was negative R847 cr (credit) vs R1,024 cr (on adjusted
pro forma) basis in FY13

Post merger performance

Better than expected performance of the copper and zinc businesses in

addition to cost benefits in aluminium business helped Sesa Sterlite post
good set of numbers for the quarter ended September 2013.

These three segments, which account for about 72% of earnings before
interest and tax (EBIT), also gained due to the weak rupee. Zinc
(contributed 63% to profits) saw good growth in output of zinc and silver,
while oil (22%) also saw some rise in production.

Though the September quarter results are not comparable due to the
merger of Sesa Goa and Sterlite Industries as well as goodwill
amortisation, the reported revenue of Rs 25,352 crore and net profit of Rs
2,394 crore came in higher than average estimates of Rs 16,240 crore and
Rs 1,930 crore, respectively.

Even when compared to the proforma figures, which assume the effective
merger date as April 1, 2013 against the actual (between August 17 and
26), the performance was better. Deutsche Research analysts say the EBIT
was 9% ahead of their estimates.

Post results, the Street has turned positive as the focus now shifts to
volume gains in copper, aluminium, power and iron ore businesses. While
iron ore mining in Karnataka has commenced, mining in Goa is expected
to start after the Supreme Court gives approval. In aluminium, Vedanta
Aluminium’s refinery will see capacity being ramped up whereas Balco's
coal block is expected to be operational by June 2014.

In power, the plant load factor or PLF is expected to reach to 50% as

against 31% in September 2013 quarter. Besides, the first of the three
units of 660 mw each of Talwandi Sabo power plant will be operational by
March 2014 quarter. In copper as well, the benefits of recently
commissioned smelter will accrue in the coming quarters.

Though most analysts have cut their EPS estimates for FY14 and FY15 due
to amortisation of non-cash item, goodwill (relating to acquisition of Cairn
India) they do not perceive it in negative light.

"Given the non-cash nature, we do not see this as a negative. We maintain

an overweight rating with a with revised price target of Rs 240 (Rs 245
earlier) and while the stock has had a very sharp run-up, we maintain our
view that Sesa Sterlite is likely to emerge as a key holding across India’s
metals and mining or industrial sectors," said Pinakin Parekh, who tracks
the company at J P Morgan in a note.

Importantly, if some of these businesses gain momentum, Ebidta and cash

flows will get a boost. Also, once the company completes buy out of
government's stake in Hindustan Zinc, a deal it has been pursuing for
long, these will help lower debt and consequently, interest cost.

The company has gross debt of Rs 84,000 crore (net at Rs 35,923 crore) in
the books and almost half of that is accounted by subsidiaries, while
interest costs are manageable at a fourth of Ebidta of Rs 7, 224 crore for
September quarter.

Impact

Shares of Sesa Goa fell more than 10% on Monday after parent
Vedanta Resources decided to merge the company with group firm
Sterlite Industries and set a swap ratio of three Sesa Goa shares for
every five Sterlite shares.

"Fall in the stocks is because of the swap ratio adjustment. Here,

the fall is steep for Sesa Goa because it is adjusting to the new
share swap ratio," Ashika Stock Brokers Research Head Paras
Bothra said.

According to the deal, Vedanta Aluminium along with the Madras

Aluminium Company will also be consolidated into Sesa Sterlite.
"Vedanta will also transfer its 38.8% holding in Cairn India to Sesa
Sterlite. The parent company's debt which will thus be lowered by
61% and Sesa Sterlite will take on debt of $5.9 billion," according
to a ET report.

As on September 2011, Sesa Goa's consolidated debt stood at Rs

4,371.5 crore, which is 0.3 times its shareholders equity. Sterlite
Industries debt stood at Rs 14,942.8 crore. As a result of the
merger, the debt of the combined entity would be approximately Rs
68,000 crore.
The boards of the two companies have approved the issue of three
shares of Sesa Goa for every five shares held in Sterlite.

However, Anil Agarwal, Chairman, Vedanta Group in an interview

with ET Now said the minority shareholders will get benefited the
most in the long-run on account of diversification benefits provided
by the newly formed entity.

Shares in Sterlite Industries pared early morning gains of 6% and

was trading lower after its parent said it would merge the company
with sister concern Sesa Goa to create 'Sesa Sterlite'.

"Prima facie, this merger ratio appears to be slightly in favour of

Sterlite shareholders. And it appears that the merger ratio is slightly
detrimental to Sesa Goa shareholders," Jagannadham Thunuguntla
Strategist & Head of Research SMC Global said.

CLSA in a recent report said the restructuring has been broadly

done in a fair manner. The new structure is vastly cleaner and the
elimination of cross-holdings with improved cash fungibility is
positive.
"The restructuring is EPS dilutive for Sesa and slightly value dilutive
for both Sesa and Sterlite. We upgrade Sesa from Sell to
underperform with a target price of Rs 230," said the CLSA report.

Shares in Sterlite Industries closed 2.5% lower at Rs 115.65. The

stock has hit a high of Rs 125.35 and a low of Rs 113.90 in trade
today.

Shares of Sesa Goa dropped 10.45% to Rs 203.60. The stock hit a

low of Rs 202.10 and a high of Rs 218 in trade today.

Technical Analysis: Ranajit Kumar Saha, Sr. Manager -

Technical Research, Microsec Capital

Sterlite Industries Ltd:

After making a high of 138.70 on 17th February, Sterlite Industries

Ltd. has given a correction of almost 18% in last five trading
sessions. Now the stock is expected to get a strong support at 109.
The immediate crucial resistance of the Sterlite is at 130. A breach
of 130 is likely to take the stock higher to 139 and then 150. We
recommend holding long positions in the stock with a stop loss of
109.

Sesa Goa Ltd

The short term crucial support of Sesagoa Ltd. is at 185. If it

breaches 185, it may further go down to 168. However, the stock
has made a gap between 223 and 217 today. So there is a
possibility that it may test the level of 223 in the extreme short term.

https://en.wikipedia.org/wiki/Vedanta_Limited