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Vedanta – JAL: Trophy Assets, Empty Pockets

Author: Published on: Published in: Vedanta (NSE:VEDL)

September 17, 2025 – “Demerge” and “Deleverage” have been Vedanta Resources Limited’s (VRL) repeated promises to creditors. The JAL acquisition for ₹17,000 crore ($1,989m) represents the exact opposite: a trophy asset that disregards those commitments.

We have reviewed JAL’s financials, VEDL’s obligations under the scheme of arrangement, and the likely impact on both VEDL and VRL. Our analysis shows that the acquisition is structurally unsound, credit negative, and will further subordinate existing creditors.

  • JAL has no synergies within its own operating divisions or with any of Vedanta’s operating units. VEDL nevertheless intends to retain JAL amid a (preposterous) demerger scheme in which it intends to spin off non-core assets.
  • JAL is unprofitable, with a 6% EBITDA margin in FY25, negative EBIT, and net margins of -29%.
    • Pro forma consolidation shows negative EBIT contribution, margin compression, and no meaningful tax shield.
  • Even if it was brought into VEDL debt-free, JAL cannot generate sufficient cash flow to meet ₹13,200 crore ($1,544m) of staggered Scheme obligations over five years. This must be funded by VEDL.
    • JAL’s largest division, construction, is heavily exposed to lumpy state contracts and is suffering from declining margins.
    • JAL’s cement and power operations are structurally loss-making. They are NPV negative.
    • The real estate portfolio is tied up in luxury golf-related developments and legal disputes. It is an illiquid legal hellscape.
    • Hospitality is the only consistently profitable JAL segment, but far too small to offset group losses.
  • Over the five-year period, JAL will require approximately ~₹18,600 crore ($2.1b) in addition to the initial ~₹3,800 crore upfront payment in direct support from VEDL simply to meet its obligations under the scheme of arrangement.
  • VEDL’s free cash flow cannot sustain its own cash needs, let alone a ₹17,000 crore ($1,989m) commitment to JAL’s creditors.
    • With dividends and brand fees already financed by borrowing under VRL’s direction, the JAL commitments can only add to this unnecessary debt burden for minority holders.
    • Asset monetization is unrealistic, with non-construction fire-sale recoveries of only ~₹3,000 – ₹5,000 crore ($351m – $585m) due to assets that are illiquid, encumbered or structurally loss-making.
    • The acquisition diverts liquidity from VRL’s deleveraging program and casts doubt on its $1.2b KCM commitment, which will now need to be funded by debt.
  • Market participants attribute the transaction to Anil Agarwal personally, underscoring promoter-driven priorities over creditor protections.

Without creditor intervention, Vedanta will finance this acquisition entirely with new debt, eroding leverage, weakening liquidity, and subordinating creditors across both Vedanta and VRL. Creditors should act now to protect their position.

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