ET reported that copper maker Sterlite Industries plans to convert all its loans in a loss making group firm into equity putting it on a possible collision course with its shareholders.

In what may well turn out to be one of the largest capital restructuring exercises in recent times, Sterlite which owns 29.5% in Vedanta Aluminum, plans to increase stake by converting 8,900 crore of its loans into equity. The conversion is expected to revive the beleaguered aluminum company by lowering its debt equity ratio helping raise outside money.

Last week in an analysts meet, Sterlite hinted at such a move by saying that it would try to bring in more clarity on its investments in Vedanta. But it did not go into specifics.

A senior company official confirmed plans for a conversion after two brokerages issued reports speculating about such a move.

Mr Alok Nemani a research analyst with Nomura Securities said that "Till now, all that Sterlite put into Vedanta has been shown as pure investment. This exercise (to restructure the capital) will demarcate that investment into debt and equity and will make things more transparent."

Sterlite officials declined to comment on the issue. But the move is likely to be resisted by shareholders upset over the loss of a steady income and the increased exposure to a loss making business.

One shareholder said that they are not comfortable with the company's investment levels in Vedanta Aluminum as it does not generate high returns. Aluminum is a drag on the overall business and has also been hit by environmental issues. And as aluminum has not been integrated the prospects for the project looks fragile.

(Sourced from Economic Times)