Sesa Goa/ Sterlite: Proposed restructuring beneficial only to Vedanta ::Emkay PDF link

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Sesa Goa: CMP: Rs227         Target Price: Rs205 Sterlite Ind.: CMP: Rs118         Target Price: Rs123 Proposed restructuring beneficial only to Vedanta ·      Vedanta Resources to restructure its businesses. Sterlite to merge with Sesa Goa (5:3 ratio); Cairn India to be subsidiary (58.9%); VAL, and Malco also to come into fold fully ·      Vedanta to hold 58.3% in ‘Sesa Sterlite’; structure simplified,  however debt would soar due to Val (Rs 197 bn) and Cairn’s  incremental 38.8% stake (Rs 289 bn) in the new entity  ·      Sesa’s outstanding shares to increase from 869 mn to 2964 mn (Sterlite- 2016 mn, Val- 72 mn and Malco- 7 mn net) with a free float of 41.7% ·      We see the deal as positive for Vedanta, neutral to Sterlite and negative for Sesa Goa; Our SOTP fair value for ‘Sesa Sterlite’ comes at Rs 205 and accordingly Rs 123 for Sterlite

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