With investment in semiconductor arena, Vedanta’s business diversification enters new foray- The New Indian Express

express news service

NEW DELHI: Amid the controversy surrounding the last-minute move of its new semiconductor plant to Gujarat, what got lost in the ensuing commotion is the story of Vedanta’s diversification plans.

Vedanta Group, which is mainly in the mining sector, says this will be its first foray into a different sector.

Vedanta Ltd, a subsidiary of London-based Vedanta Resources, is one of the world’s leading oil, gas and metals companies with significant operations in oil and gas, zinc, lead, silver, copper, iron ore, steel and aluminum and energy around the world. India, South Africa and Namibia.

With this move, the conglomerate is on track to diversify its portfolio from oil to metals in another strategically important sector: semiconductors.

semiconductor foray

The mining giant, along with Taiwanese chipmaker Foxconn, plans to invest Rs 1.54 lakh crore to establish the semiconductor ecosystem in Gujarat.

According to the company, the proposed semiconductor manufacturing unit will operate on the 28nm technology nodes and the display manufacturing unit will produce Generation 8 displays for small, medium and large applications.

Vedanta will hold 60% of the shares in the joint venture, while Foxconn will hold 40%.

The group said the project will see the light of day in the next two years and is expected to create a lakh of jobs for the country. However, the new business will be hosted by Volcan Investments Limited, the holding company owned by Anil Agarwal’s family trust.

“India’s own Silicon Valley is one step closer now. India will meet the digital needs of not only its people, but those of all seas. The journey from being a token taker to a token maker has officially begun,” Anil Agarwal said in a statement after making the announcement.

And while Agarwal’s statement was full of patriotic fervour, he didn’t explain in so many words what made the company take such a big leap into the semiconductor business.

While investors approved of the announcement and shares of Vedanta Ltd rose as much as 13% after the announcement, analysts and experts believe this may be a good move for the company as the Indian semiconductor market was valued at $27 .2 billion. in 2021 and is expected to grow at a healthy CAGR of almost 19% to reach $64 billion in 2026.

Sunil Duggal, the company’s CEO, on an analyst call in late July, tried to explain the company’s interest in the Semiconductor business.

“The Indian government has set a policy on how they can support this (semiconductor) sector, where it is also a very strategic sector for the country and the government is quite keen to make this work in the country. That is why they have declared the new policy and even the state government, each of the state governments was quite excited about this, ”he had said responding to an analyst’s question.

The government has announced a Rs 76,000 crore Production Linked Incentive (PLI) scheme for semiconductors.

Under the Production Linked Incentive (PLI) scheme, financial support will be offered to semiconductor units, as well as an incentive of 4-6% on net sales for 5 years (maximum Rs 30 crore per application) .

The company also announced that it would manufacture iPhones, TV sets and electric vehicles in Maharashtra.

“The company will make Maharashtra a manufacturing hub for iPhones, other TV sets and electric vehicles,” said Anil Agarwal after the furor over the company’s last-minute plan to move the Maharashtra semiconductor plant to Gujarat.

From mining to electronic manufacturing

The mining or metals sector, Vedanta, is trying to venture into other sectors to diversify its portfolio into electronics manufacturing and semiconductors.

“We are looking to develop capabilities in companies with new investments planned. For FY23, we have planned a capital investment of about $2 billion in zinc, oil and gas, and aluminum. I am excited about our acquisition of Nicomet, which makes us the sole producer of nickel in India, a metal that is in high demand for electric vehicles and batteries,” Agarwal said in his AGM speech.

Financially, the last year has been a good year for the mining giant. It posted a record revenue of Rs 131,192 crore and EBITDA of Rs 45,319 crore, which increased by 66% year-on-year and contributed more than Rs 54,000 crore to the public treasury.

In fact, the company delivered strong performance across all of its business verticals.

Its aluminum business recorded the highest annual production in history. His debt was reduced by Rs 3435 crore. Based on its annual financial result, the company has a strong liquidity position with cash and cash equivalents of Rs 32,130 crore (FY2021: Rs 32,514 crore).

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