Vedanta slips 9% after it clarifies semiconductor venture to be undertaken by Volcan Investments

• The company has clarified that the proposed semiconductor manufacturing will be undertaken by the holding company, Volcan Investments and not listed Vedanta.
• Volcan Investments is a holding company wholly owned by the Agarwal family trust, which is not listed on exchanges.
• With this, India will enter the list of very few countries like Taiwan that are leaders in making such chips.
• The rating agency Moody’s says that Vedanta is not expected to be the financier in the proposed investment but in future if it does get involved, it will hurt its finances.

Shares of Anil Agarwal-led company slipped as much as 9% today after surging 14% in the last two days. This comes after the company clarified that the proposed semiconductor manufacturing will be undertaken by the holding company, Volcan Investments and not the listed Vedanta.

Volcan Investments is a holding company wholly owned by the Agarwal family trust, which is not listed on exchanges.

Shares of Vedanta were on an uptrend in the last few days as investors were excited about the company's investment into semiconductor manufacturing. Besides, reports of Vedanta venturing into making Apple iPhones and electric vehicles added to the rally.

“We reiterate that the proposed business of manufacturing semiconductors is not under Vedanta Limited and we understand that it will be undertaken by the ultimate holding company of Vedanta Limited, Volcan Investments Limited,” said the company in a BSE statement.

Vedanta, an oil-to-metals conglomerate, and Taiwanese electronics giant Foxconn have formed a joint venture to invest over ₹1.54 lakh crore to set up a semiconductor manufacturing facility in Gujarat. The proposed facility will come up over the next two years in Gujarat.

Chairman Anil Agarwal shared the news on Twitter and said the investment of ₹1.54 lakh crore will be set up in Gujarat and “will help make India's #Atmanirbhar Silicon Valley a reality."

History gets made! 🇮🇳 Happy to announce that the new Vedanta-Foxconn semiconductor plant will be set up in #Gujarat. Vedanta’s landmark investment of ₹1.54 lakh crores will help make India's #Atmanirbhar Silicon Valley a reality. (1/4)

— Anil Agarwal (@AnilAgarwal_Ved) September 13, 2022

Reports say huge investment in Gujarat comes ahead of key local elections. There is a political twist to it as well given some reports say Maharashtra chief minister Eknath Shinde had invited the company to sign a Memorandum of Understanding (MoU) to set up a facility in Talegaon near Pune city in Maharashtra.

With this, India will enter the list of very few countries like Taiwan that are leaders in making such chips.

The rating agency Moody’s says that Vedanta is not expected to be the financier in the proposed investment but in future if it does get involved, it will hurt its finances.

“Volcan’s proposed $20 billion semiconductor project has no immediate impact on Vedanta Resources Limited’s credit profile. We do not expect Volcan to extract any cash from Vedanta to fund this investment. Any deviation from this expectation, such that Vedanta is used as a financing vehicle for Volcan, will weigh on the company’s weak liquidity profile and pressure its B2 negative corporate family rating,” said Kaustubh Chaubal, senior vice president at Moody’s Investors Service.

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