Why is Vedanta delisting from the London Stock Exchange?

By Richard Harkinson, research associate for London Mining Network

What is Vedanta?

Vedanta Resources plc is a London stock exchange listed [second investment tier FTSE 250] metals mining and processing company which operates mines, metal refineries and smelters through eight subsidiaries, mainly in India and Zambia, increasingly in South Africa, but also in other countries.

It is infamous for its untruthful and extravagant claims made on its original listing in 2003 over its alleged access to and control over bauxite in Niyamgiri hills, over its complete denial of the rights of the Dongria Khond communities, whom it continues to harass, and its premature and illegal building of an alumina refinery at Lanjigarh in Odisha India.[1]

It is delisting essentially because its major shareholder and chair/actual CEO Anil Agarwal wants to avoid any more public interest litigation in the UK by those suffering from the impacts of Vedanta’s projects, such as that by farming communities in Zambia where Vedanta operates copper mines and a smelter. Since 2015, Vedanta has continually tried to prevent 1826 Zambian farmers and communities from seeking justice in UK courts. [2]

The other main reasons relate to Agarwal’s wealth and dominant control position in relation to the interests of other ‘public’ shareholdings. Agarwal can decide to delist, because his domination of Vedanta crowds out effective minority shareholders’ engagement, and because it appears that he can arrange loan finance, having accumulated sufficient offshore wealth to do this as profits from all his ‘low costs’ businesses.

It would appear however that Vedanta’s continuing unwillingness to disclose the risks in their businesses is not challenged because of the very limited disclosure demands made by the various elements of the UK regulatory system [the private Stock Exchange . and the statutory Financial Conduct Authority].

Nevetheless, Agarwal wants to avoid another reputational and financial fiasco over Vedanta’s complicity in the police’s shooting of peaceful demonstrators outside of Vedanta’s Tamil Nadu copper smelter at Thoothukudi [Tuticorin] in May this year. [3]

Additionally Vedanta argue that their LSE share-price has been in freefall since 2016, although they couch this in terms of falling commodities prices, and a stock exchange institutional undervaluation of their resources.

Source: Foil Vedanta 2018 [1]

The reasons for this are linked both to its overstretch of its indebtedness [over USD 8 billion] to acquire more and more resources and its continual disastrous environmental management [see House without a Toilet, below]

What ‘reasons’ does Vedanta claim for its delisting?

It says it wants to simplify its corporate holdings framework. Yet it reports to the US SEC that the framework is straightforward [4].

It essentially has eight subsidiaries. Both Vedanta Ltd and Zinc India [HZL] now have bigger capitalisations [value of shares] than Vedanta Resources plc. The ‘complexity’ of its holdings derive mainly from all it various ‘offshore’ holdings.

Vedanta also claims a reason is that the prices of commodities it works in are falling. The real problem is that they operate so badly.

Agarwal also almost candidly says that he’s taken his wealth out of Vedanta gained from its 2003 listing, and he can no longer see that a LSE listing is viable mainly to the extent that it still interests him.

How is Agarwal doing this?

Vedanta announced to the London Stock Exchange [LSE] in July that he wants to buy the 33.3% of shares he doesn’t already own, and the LSE recommended that Agarwal should present an advisory to shareholders saying that an independent committee within Vedanta had discussed the nature of the offer with a similar group within his offshore investment trust [Volcan Investments]. The Vedanta ‘independent directors’ were appointed so as to be assured of the benefits that the former can recommend to Vedanta’s independent shareholders.

Agarwal’s Bermuda triangle: In the opaque world of offshore finance Volcan Investments Ltd [Bermuda] [VIL] has become the guarantor for USD 1.1 billion time-bound loans by Standard Chartered and Credit Suisse AG Singapore to two other Agarwal subsidiaries, one of which is Volcan Investments Ltd [Cyprus]-the ‘borrower’. VIL’s auditors PWC state reservations on their accounts because they don’t present ‘consolidated financial statements of their subsidiaries, contrary to International Financial Reporting Standards, and that these “would have been materially affected”.

These new split loan agreements 50:50 between Standard Chartered and Credit Suisse [with some unclear involvement of Citibank] are designed to pay down the accepted and the mandatorily seized and sold share purchases of remaining minority shareholders. They are subject to quarterly review which can reduce the total loans available. The process for Vedanta Resources is transfer more debt to the India regulated Vedanta Ltd.

VIL present only two years of accounts 2016 and 2017. The 2016 accounts stated 85% of their assets as ‘investments in subsidiaries, and that their liabilities of USD 41 million were mainly loans, with a share capital of only USD 2million. Their 2016 income was expressed as USD 300 million losses. The 2017 changes are inexplicable. Their investment in subsidiaries rose to 89%, their liabilities reduced to USD 1.5 million, and notional ‘income’ rose to USD 1.242 billion, 96% of which is signified as “unrealised appreciations of investments in financial assets”.

The fog of non-disclosure makes any “reassurance” to Vedanta’s ‘independent directors’ impossible.
How can this be “independently formed” discussion and advice? It can’t because of the secrecy afforded offshore vehicles such as Volcan. It would be a testing stretch of the imagination to consider the senior ‘independent’ director in Vedanta Deepak Parekh and the other ‘independent’ Vedanta directors to be ‘independent’. Nobody in Volcan is independent. After all, what is offshore secrecy for?

It is argued that Integral to the LSE’s wider appeal and at its core, off-shore provision is an integral part of the ‘success’ and appeal to investors of the London Stock Exchange [5]. Noises made by UK politicians such as former PM Cameron when he hosted the G7 and headlined about restricting tax havens are strictly symbolic, and not meant for action.

What was Agarwal’s offer?

It’s so unclear that it confused FT’s mining editor Neil Hume in articles on successive days, firstly he thought the offer price was at a ‘premium’ to the open market price. Then he quoted analysts saying it underpriced the shares. Vedanta’s notice of offer text is confusing and contradictory. [6].

The actual offer does not represent an offer at a premium.

A CSR person at a UK shareholder [they own 3.8%] said his group’s position was to reject the offer, but they have great difficulty suggesting that the post delisting situation in which Indian [and Zambian ] regulators alone cannot effectively manage Vedanta, but that that is not a position they want to publicise. This was a concern to one of the world’s largest investment funds [the Norway pension fund] when it disinvested from Vedanta in 2007 [7]; It re-affirmed its position in 2016, because of “unacceptable risk your company will cause or contribute to severe environmental damage and serious or systematic human rights violations” [8]

Is Agarwal in a hurry? Yes, given that the 2018 AGM on 1st October is the last available shareholders’ forum where he can announce his take-over progress and then complete it.

The UK government must implement, by June 2019, the EU 2017/828 Amended Shareholders’ Directive, Article 9 [c] which wouldn’t allow such secretive doings over ‘material transactions’ between ‘related parties’ – for being antithetical to the independent shareholders’ interests.

Why are Vedanta so difficult to regulate?

In effect, they operate like a house without a toilet. In most of their operations they dump mining and smelter waste [slag] without any regard to its contamination potential. Vedanta consistently dump waste next to their smelters and captive thermal power plants. This is common to Zambia, Tamil Nadu, Odisha, Korba in Chhattisgarh.

While NGOs in Chennai want to litigate against the Tamil Nadu ‘captured’ or inadequate state regulators over Vedanta’s 65m chimney height when international good practice would prescribe a height of 165m, the cause of extensive groundwater pollution is Vedanta’s dumping of copper smelter slag.

Bank Track: “Since 2009, several banks have indicated they will not invest in Vedanta Resources anymore. [including] Deutsche Bank, WestLB, and Danske Bank. Many investments funds have disinvested from Vedanta Resources. [including] Norwegian Government Pension Fund, Martin Currie Investments, the Church of England, the Joseph Rowntree Charitable Trust and the Dutch Pension Fund PGGM. The main reasons for these disinvestments are Vedanta’s persistent bad performance on environmental, social, and human rights issues, and its refusal to cooperate and improve on these issues.”


[1] http://www.foilvedanta.org/news/vedantas-billions-regulatory-failure-environment-and-human-rights-report-released/. FV describe Vedanta’s 2003 IPO raising USD i billion which they used to increase their stakes in their Odisha alumina project and in HZL.. Ibid pp14-16 for their Orissa project, defeat of their claims to Niyamgiri through MOEF decisions and referenda results following Indian Supreme Court decisions
[2] ibid pp14-16. Vedanta acquired control of Konkola Copper mines [KCM] in 2004-5. FV have excellent accounts of pollution problems from 2006, including the London litigation, and about how Vedanta have avoided taxes and royalties up to the London 2014 arbitration finding against them in respect of USD 140 million.
[3] ibid pp3, 8-9, compare with https://scroll.in/latest/880128/vedanta-founder-anil-agarwal-says-he-is-very-much-in-pain-because-of-thoothukudi-deaths
[4] Vedanta Ltd reports, using Form 20 F, to the SEC’s EDGAR as a foreign company in respect of its NYSE listing, and because 25% of its equity shares are American depository shares https://www.sec.gov/Archives/edgar/data/1370431/000119312518233011/d529055d20f.htm
[5] https://www.theguardian.com/news/2018/sep/07/the-real-goldfinger-the-london-banker-who-broke-the-world
[6] FT
[7] http://www.madhyam.org.in/norways-sovereign-wealth-fund-to-invest-in-india/
[8] see FV ibid pp 4 and p21
[9] The Council of Ethics , Government Pension Fund Global, Assessment of Vedanta Resources plc, 27 May 2016 http://www.minesandcommunities.org/article.php?a=13602
[10] https://www.banktrack.org/company/vedanta_resources#popover=financierstrayal-frontline-on-sterlites-thoothukudi-massacre/

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