Strategic Demerger: Unlocking Value for Core Product and Service Segments at Sterlite Power

16 July 2024

Sterlite Power, a leading private sector power transmission infrastructure developer and a Vedanta Group Company, has taken a significant strategic step towards enhancing its value proposition and operational efficiency. The company has successfully executed a strategic demerger of its EPC (Engineering, Procurement, and Construction) segment, resulting in the establishment of SGL5 as a separate entity. This move is set to unlock substantial value for Sterlite Power’s core product and service segments.

Demerger of EPC Segment for Value Creation

The demerger of the EPC segment into SGL5 comes with a notable $1 billion investment platform for the power transmission sector in India. This strategic joint venture involves Singapore's sovereign wealth fund GIC investing $500 million (https://economictimes.indiatimes.com/industry/energy/power/sterlite-gic-to-set-up-1-billion-jv-for-power-transmission/articleshow/108800025.cms?from=mdr) for a 49% stake, while Sterlite Power will deploy a similar amount for a 51% stake. This strategic decision aligns with Sterlite Power's vision of enhancing its business focus and operational capabilities while providing a robust platform for future growth and development.

Strategic Benefits of the Demerger

1. Wealth Creation: The demerger is expected to drive significant wealth creation for the company. By segregating the EPC segment into a distinct entity, Sterlite Power can better manage and optimize its resources, leading to enhanced financial performance and operational efficiency.

2. EPS Growth: The demerger is anticipated to contribute positively to the company's Earnings Per Share (EPS). By focusing on its core strengths and leveraging the specialized capabilities of SGL5, Sterlite Power can achieve higher profitability and return on investment, benefiting its shareholders.

3. Enhanced Investment Appeal: With the establishment of SGL5 and the substantial investment from GIC, Sterlite Power is poised to attract more investors and strategic partners. This enhances the company’s investment appeal and positions it for future growth opportunities in the competitive power transmission infrastructure market.

Remote E-Voting for Resolution Approval

In conjunction with this strategic initiative, Sterlite Power has announced that it will be conducting a postal ballot through remote e-voting to seek shareholder approval for the resolution related to the demerger and the associated transactions. The remote e-voting process ensures that all shareholders have the opportunity to participate in this important decision, promoting transparency and inclusivity in the company’s governance.

The Board of Directors has appointed Ms. Mehak Gupta, Proprietor of M/s Mehak Gupta & Associates, Practicing Company Secretaries, as the Scrutinizer for conducting the postal ballot in a fair and transparent manner. Shareholders are encouraged to read the detailed instructions provided in the Postal Ballot Notice and cast their votes electronically before the deadline to ensure their participation in this crucial decision-making process.

Sterlite Power’s Robust Portfolio and Market Leadership

Sterlite Power is a prominent player in the power transmission infrastructure sector, with a robust portfolio that includes 33 completed, sold, and under-construction projects covering approximately 15,350 circuit kilometers of transmission lines across India and Brazil. In India alone, the company manages projects worth over USD 2 billion. Since 2011, Sterlite Power has secured a third (by tariff) of all inter-state private transmission projects awarded in India under competitive bidding, underscoring its market leadership and competitive edge.

Conclusion

The strategic demerger of the EPC segment and the establishment of SGL5 as a separate entity with a substantial $1 billion investment platform involving GIC is a transformative move for Sterlite Power. This initiative not only unlocks value for the company's core product and service segments but also positions Sterlite Power for sustained growth and enhanced shareholder value. As a leading private sector power transmission infrastructure developer and solutions provider, Sterlite Power continues to set benchmarks in the industry with its innovative strategies and robust project portfolio.

Sterlite Power (a Vedanta Group Company) remains committed to driving excellence in the power transmission infrastructure sector, leveraging its expertise and strategic initiatives to create value for its stakeholders and contribute to the development of a sustainable and efficient power transmission network.