London-based Vedanta Resources is kick starting the break-up of its business by spinning off its £13 billion aluminium division.
The new firm will be the world's fourth biggest aluminium player, behind Russia's United Company Rusal, Alcoa in the US and China's Chalco.
The spin-off will be the first in a series for Vedanta, with its zinc, iron ore and power units expected to follow suit over the next few years. The company will, however, retain controlling interests in all of them.
The company believes that simplifying the ownership structures of its subsidiaries will increase the value of the overall group.
Vedanta will apply to the Indian courts to demerge the aluminium unit, a process that could take several months. The business would then start trading in Mumbai, with a secondary listing to take place in either London or New York.
It is thought that only about 10 to 15 per cent of the company will be listed, which would raise up to £1.9 billion. The initial public offering is expected to take place by the end of the year.
VedantaÔÇÖs Indian businesses are currently consolidated under Sterlite Industries, which directly makes copper and holds stakes in companies smelting aluminium and zinc. If the plan is approved by shareholders and regulators, Sterlite will become primarily a maker of copper, zinc and lead while most of the aluminium business will be with the new listed company, Vedanta Aluminium. Both entities, Sterlite and Vedanta Aluminium, will be majority owned by the parent, Vedanta Resources.
Vedanta Aluminium is currently 70 per cent owned by Vedanta Resources and the rest is with Sterlite Industries.
Bharat Aluminium, or Balco, which is also part of Vedanta, is not included in the spin-off, since the government owns 49 per cent of it.
Vedanta Aluminium is currently planning to put together an integrated aluminium operation in Orissa, which would consist of a 1.75 million tonne aluminium smelter at Jharsuguda, a five million tonne alumina refinery and a power plant of 1,215 megawatts.
Vedanta's Zambian copper business is expected to be the next unit to be spun off. The company also has copper operations in Australia and India.
