Vedanta Limited completed its Composite Scheme of Arrangement effective May 1, 2026, splitting into five separate listed entities. The company announced specific cost of acquisition apportionment ratios for shareholders, determining how the original purchase cost of Vedanta shares must be distributed across the five entities for tax purposes.
The allocation ratios are: Vedanta Limited (parent) retains 52.34%, Malco Energy Limited (Oil & Gas) receives 21.49%, Talwandi Sabo Power Limited gets 12.23%, Vedanta Aluminium Metal Limited receives 7.15%, and Vedanta Iron and Steel Limited gets 6.79%. These ratios were determined based on the net worth of the company and the net assets of the respective undertakings, in accordance with Section 73 of the Income-tax Act, 2025.
For shareholders, this means if you purchased 100 shares of Vedanta at ₹500 each (total cost: ₹50,000), your apportioned cost basis becomes: Vedanta Limited ₹26,170, Vedanta Aluminium ₹3,575, Talwandi Sabo Power ₹6,115, Malco Energy ₹10,745, and Vedanta Iron & Steel ₹3,395. This apportioned cost becomes the acquisition cost for calculating capital gains when shares in any entity are sold in the future.
The demerger carries important tax considerations. Under the demerger, the allotment of shares does not attract immediate capital gains tax, as such allotment is not treated as "transfer" under the Income Tax Act. Shareholders face no tax liability when the new shares are credited to their demat accounts.
However, capital gains tax will apply when shareholders sell shares in the demerged entities. To calculate the tax, investors must divide the original purchase cost of Vedanta shares between the five companies using the cost allocation ratios announced by the company. The holding period for the new shares is counted from the date when the investor originally purchased Vedanta shares, not the demerger date. This is crucial for determining whether gains qualify as long-term capital gains (LTCG) or short-term capital gains (STCG).
The listing price of each new entity will be determined through a Special Pre-Open Session (SPOS) mechanism. On April 30, 2026, Vedanta underwent a special pre-open session from 9:00 AM to 10:00 AM where order matching happened at the end of the session. The price of all four demerged entities is calculated based on the difference between the closing price of Vedanta Ltd on April 29, 2026, and the open price of Vedanta Ltd discovered during the SPOS on April 30, 2026.
Several key factors will influence individual listing prices. Fundamental business metrics vary significantly across entities. Vedanta Aluminium is expected to be the most attractive entity with an expected listing valuation of over ₹400 per share, supported by strong contribution to group revenues and margins, tight global supply, elevated aluminium prices, and ongoing capacity expansions. Sector-specific valuation multiples will apply—aluminium compared with global metal companies, oil & gas with upstream players, power on tariff visibility, and steel on capacity utilization.
Debt allocation is identified as the most critical factor influencing listing prices. Entities with lower debt-to-EBITDA ratios will command higher valuations. Growth prospects and industry dynamics also play a role, with aluminium benefiting from tight global supply while oil & gas faces commodity price volatility.
There is minimal direct correlation between cost allocation ratios and expected listing prices because they serve different purposes. Cost allocation is based on historical net worth and book value (accounting perspective), while listing prices are based on future earnings potential and market sentiment (market perspective).
This divergence exists because of conglomerate discount removal—Vedanta historically traded at a discount because investors were unwilling to pay full value for a diversified company. Post-demerger, each pure-play entity can be valued independently, attracting sector-specific investors.
Market efficiency vs. accounting allocation also creates divergence. Different sectors command different valuation multiples. Aluminium currently benefits from tight global supply and elevated prices, commanding premium valuation, while oil & gas faces volatility and regulatory risks, leading to variable valuation.
The National Company Law Tribunal (NCLT), Mumbai Bench, issued two critical orders sanctioning the composite demerger scheme: Order dated December 16, 2025 initially approved the scheme, and Order dated January 9, 2026 provided additional sanctions. In its order, the NCLT held that the scheme is fair and reasonable, does not violate any law, and is not contrary to public policy, as all statutory compliances have been fulfilled. Others +1
The cost allocation framework was directly influenced by Section 2(35) of the Income-tax Act, 2025, which governs the tax-neutral treatment of demergers. The NCLT ensured that the cost allocation ratios were consistent with tax neutrality requirements. The demerger was executed under Sections 230 to 232 of the Companies Act, 2013, which require fair and equitable treatment of all shareholders and creditors, disclosure of all material information, and court/tribunal sanction. Others +2
Vedanta countered by securing No Objection Certificates from eight banks and demonstrating that government claims would stay protected even after demerger.
The true validation of Vedanta's demerger cost allocation begins after listing because of a fundamental disconnect between two valuation frameworks. Cost allocation is based on historical net worth and book value for tax compliance, while market valuation is based on future earnings potential for wealth creation.
The April 29 closing price reflected the combined value of all five businesses, while the April 30 opening price reflected only the residual Vedanta Ltd. The difference represented the combined value of the four demerged entities.
The post-listing performance will validate or challenge the initial cost allocation ratios. The most significant divergence is expected in Vedanta Aluminium, which has a cost allocation of only 7.15% but is expected to command a market valuation representing potentially 50%+ of the total value. The sum-of-the-parts valuation for all resulting entities combined is estimated at ₹820 per share.
Under Indian tax law, shareholders cannot automatically adjust their cost basis based on actual listing prices deviating from allocated acquisition costs. The cost allocation ratios announced by Vedanta remain fixed for tax purposes regardless of market performance.
Shareholders can adjust their effective exposure through portfolio rebalancing without changing tax cost basis. If an entity lists significantly above its allocated cost ratio, shareholders can hold the position to benefit from continued appreciation or trim partially to rebalance portfolio weights. Tax-loss harvesting is another strategy—if an entity lists significantly below its allocated cost, shareholders can sell to realize losses for offsetting other capital gains.
Shareholders benefit from holding period continuity from their original Vedanta purchase date. This means shareholders who held Vedanta long-term can sell any of the demerged entities immediately and still qualify for LTCG treatment. Strategic positioning based on valuation divergence allows shareholders to accumulate undervalued entities, hold fairly valued ones, and trim overvalued positions.
The post-listing period represents the real test because markets will ultimately value each business based on its standalone merits, not historical cost allocations. Historical precedent shows Indian conglomerate demergers have created 15-30% value for shareholders in 6-12 months post-listing. As each entity publishes independent financials, analyst coverage develops, and sector-specific investors enter, information asymmetry reduces, allowing for more accurate price discovery.
