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Sterlite plans Rs 8000 cr IPO

Vedanta Resources is considering an initial public offering of Sterlite Energy, its Indian energy unit, to raise up to $2 billion to spearhead its push into the country’s power sector. The move comes as the UK-listed group is facing increasing controversy over its human rights and environmental record in India, with Norway this week dropping the mining and metals group from its $350 billion sovereign wealth fund for ethical reasons.

Sterlite Energy, controlled by Sterlite Industries, India’s largest metals and mining company and part of the Vedanta group, is planning to build power projects with total capacity of 10,000 megawatts in the country. Sterlite Industries told the Bombay Stock Exchange this week that it was considering “financing options for these projects, including the issuance of equity and incurrence of debt”.

People familiar with Sterlite’s plans said that, as part of this, it was considering an initial public offering, probably in India, to raise between $1 billion and $2 billion to fund the plan. The move marks a significant diversification for Vedanta into power generation at a time when India is aggressively soliciting funding for the sector. The government estimates India needs to invest $490 billion in the next five years in infrastructure, a large proportion of which will be dedicated to the power sector.

Reliance Energy, a unit of the conglomerate controlled by Anil Ambani, is planning to raise about Rs 12,000 crore in what will be the country’s biggest IPO. Vedanta declined to comment on the plans for an initial public offering. In its statement, Sterlite Industries said it planned to invest in government projects and in its own initiatives. “The majority of these projects, if awarded and approved, are expected to be commissioned over the next five years,” it said.

But Vedanta will have to deal with concerns from international investors following the move by Norway’s Government Pension Fund – Global, known as the “oil fund”, to bar investment in Vedanta, Sterlite Industries and another unit Madras Aluminium Company. Norway’s finance ministry said: “The fund runs an unacceptable risk of contributing to severe environmental damages and serious or systematic violations of human rights by continuing to invest in the company.”

Last month, thousands of Indian tribal people protested against a Vedanta alumina refinery being set up in Lanjigarh, in the eastern state of Orissa. Vedanta on Thursday declined to comment, saying the the Landijargh case was sub judice in the Indian courts.

But the company said it upheld the highest standards of corporate social responsibility.

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Moneycontrol.Com

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