Sesa-Sterlite's debt of Rs 70kcr to hurt investors: Tulsian

In a significant move, Vedanta Resources, the London listed metals and mining firm has combined all its key investments in India into a single company called 'Sesa Sterlite', thereby creating a simple structure spanning industries from oil to iron ore.

However, SP Tulsian of sptulsian.com feels that Vedanta has conveniently got rid of the loss making Vedanta Aluminum by transferring it to the Indian company. As per calculations, debt of the new merged entity stands at Rs 70,000 crore which will definitely not go down well with the Indian investors.

Here is an edited transcript of his comments. Also watch the accompanying video.

Q: You have had some of the clarifications from the group chairman and also some of the CEOs, what kind of feeling do you get after the concall?

A: Debt of Vedanta Aluminum has been clarified at USD 4 billion and if you see the amount having brought by the Vedanta Group is close to about USD 400 million. So, that means inspite of they holding 70.5% in Vedanta Aluminum they have not brought the matching loan, while the burden of the losses to a great extent were shared by Sterlite Industries.

I think Vedanta has conveniently or infact have enjoyed the huge valuations or the benefits of this whole scheme, which if you want I can just narrate them again, that they first got rid of the loss making Vedanta Aluminum by transferring it to the Indian company.

Secondly they deleveraged their balance sheet by USD 5.9 billion by transferring the stake of Cairn India, which effectively has been done at Rs 391 per share while the share closed at Rs 381 on Friday. So that means the valuation has been transferred at huge value.

Third thing, the Vedanta Group has escaped from the forex volatility losses. Whereas couple of months back we have seen dollar was ruling at 54, now it rules at 49. So we have taken the valuation of Cairn fair at the present valuation of Rs 49 per dollar. Suppose if it moves back to 53-54 the cost will zoom to about Rs 425-Rs 430 per share for Cairn India.

Apart from that the prime assets for which we don