Vedanta Ltd’s ambitious plan to demerge its diversified business units has encountered significant hurdles, with the central government raising objections that could delay or reshape the proposed corporate restructuring. The objections center around regulatory and compliance concerns, particularly in sectors where Vedanta operates under sensitive government oversight, including natural resources and energy.

The demerger plan, announced in late 2023, envisioned splitting Vedanta into six independent listed entities covering aluminum, oil and gas, power, steel and ferrous materials, base metals, and the semiconductor/display business. The move was positioned as a strategy to unlock shareholder value, simplify operations, and provide focused growth pathways for each vertical. However, as of August 2025, the government has expressed reservations about certain aspects of the restructuring, citing both sectoral sensitivities and implications for strategic industries.

According to officials, the government is particularly cautious about segments such as oil and gas and base metals, where Vedanta holds critical assets and licenses. Concerns have reportedly been raised regarding whether the separation of businesses could impact accountability, resource management, or future regulatory compliance. Additionally, officials have indicated that a clearer roadmap on how Vedanta plans to manage liabilities, inter-company transactions, and governance standards post-demerger is required.

Vedanta had earlier secured shareholder and board approvals for the demerger, with the process slated for completion in FY26. The group’s management projected that the new structure would offer investors greater visibility into each business, enabling differentiated valuations and attracting sector-specific investments. For Vedanta Resources, the London-based parent struggling with high debt levels, the restructuring was also expected to create opportunities for unlocking capital and raising funds more efficiently.

However, the government’s intervention has cast uncertainty on the timelines and shape of the proposed plan. Market watchers note that Vedanta’s stock has reflected this ambiguity, showing volatility since reports of the objections surfaced. While investors had initially welcomed the demerger as a value-creation opportunity, fresh regulatory headwinds have tempered optimism.

Industry experts suggest that Vedanta may need to rework parts of its proposal, offering stronger assurances on compliance and governance mechanisms to gain government approval. This could include enhanced disclosures, tighter regulatory oversight of sensitive businesses, and a phased restructuring approach rather than a single sweeping demerger.

The development comes at a time when Vedanta is simultaneously pushing large-scale investments, including its semiconductor and display ventures, in alignment with India’s technology and manufacturing ambitions. Any delay in restructuring could complicate its capital-raising plans, given its reliance on unlocking value through differentiated listings.

The Ministry of Corporate Affairs and sectoral regulators are expected to hold further consultations with Vedanta in the coming weeks. While the government has not rejected the plan outright, the current objections underline the complexity of restructuring a conglomerate with such extensive operations in critical industries.