Shares of Vedanta Ltd edged higher on Wednesday after the debt-ridden firm got creditor approval for a major demerger it has planned.

What Happened: Mining conglomerate Vedanta said it received approval from 75% of its secured creditors for the proposed demerger of its businesses. This marks a significant step in the company’s plan to split into six independent listed companies.

The company will now seek clearance from the stock exchanges and file its demerger plan with the National Company Law Tribunal (NCLT). Additionally, approval from shareholders will be required for the demerger.

The demerger will result in the creation of independent companies for aluminium, oil & gas, power, steel and ferrous materials and base metals, while the existing zinc and newly incubated businesses will remain under Vedanta Ltd. Following the demerger, shareholders will receive shares in five new listed entities separated from Vedanta Ltd.

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Vedanta’s lenders include state-owned banks such as State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, Indian Overseas Bank, Union Bank of India and Bank of Maharashtra. Private sector banks like Yes Bank, ICICI Bank, Axis Bank, IDFC First Bank and Kotak Mahindra Bank are also part of Vedanta’s consortium of lenders.

The approval from most creditors comes as Vedanta is making progress in reducing its debt. Last week, the company raised ₹8,500 crore through qualified institutional placement (QIP), with the proceeds being used to repay debt owed to Oaktree Capital, Deutsche Bank and Union Bank of India.

By March 31, the company’s net debt had decreased by ₹6,155 crore from December 2023, totalling ₹56,388 crore. This reduction was primarily due to strong cash flows from operations and a release of working capital.

Price Action: Vedanta’s share price was up just 0.22% at ₹448.20 in early trade on Wednesday. The stock is up nearly 75% so far this year.

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