Vedanta eyes Konkola IPO as profit falls

Vedanta Resources is working on possible listings of its energy and Zambian copper units to crystalise billions of dollars of hidden value.

“We think there is the potential to unlock substantial shareholder value through these IPOs,” chief executive Mahendra Mehta told a presentation on Thursday after the company posted a weaker than expected jump in first-half profits.

He declined to peg a value, but a media  last month said a flotation of Konkola Copper Mines (KCM) in Zambia could value the unit at 4 billion pounds ($6.46 billion) and raise 500 million pounds.

“We’re looking at a timetable (for KCM) of possibly during the current year,” Mehta added.

The London-listed group filed an application last year for a $1.1 billion initial public offering of Sterlite Energy, but it has been on hold since then.

Liberum Capital said Vedanta’s renewed work on IPOs was an effort to cut its market discount following several setbacks with growth projects.

“The KCM listing is a large step in the right direction, in our view, given the realisation of value which should become apparent through an independent listing,” a note said.

Vedanta shares, which have underperformed the British mining index by 25% this year, gained 2.1% by 1025 GMT, compared to a 1.9% rise in the mining index.

First half earnings per share jumped 81% to 123.8%, driven by higher prices and output, but this was below an analyst  consensus forecast compiled by the firm of 130 cents.

Mehta said Vedanta was not worried about finalising its plan to buy a stake of up to 51% in Cairn Energy’s India unit in a deal worth up to $9.6 billion.

Vedanta is also working to conclude its agreed $1.34 billion purchase of the zinc assets of Anglo American announced in May. Both takeovers were expected to be finalised by the end of March next year, Mehta said.

Zinc and iron ore are Vedanta’s most profitable products, accounting for 34% and 32% of first-half core earnings, respectively.