Vedanta shares in focus as Foxconn pulls out of $19.5 billion JV

Shares of Vedanta are expected to attract attention on Tuesday morning following the announcement that Foxconn is withdrawing from a $19.5 billion joint venture with Vedanta Ltd, which aimed to establish semiconductor manufacturing in India. Despite this development, a Vedanta spokesperson expressed the company\’s strong commitment to the semiconductor fab project and mentioned that they have secured alternative partners to establish India\’s first foundry.

Foxconn confirmed that it will not proceed with the joint venture and mentioned its plans to remove the Foxconn name from the entity, which is now fully owned by Vedanta, as stated in their official statement.

Year-to-date, Vedanta shares have declined by 11%, while the BSE Metal index experienced a 1.58% drop during the same period.

In other news related to Vedanta, Hindustan Zinc, led by Anil Agarwal, declared an interim dividend of Rs 7 per share, resulting in a payout of Rs 1,920 crore for Vedanta.

Additionally, notable updates include the listing of Jio Financial Services, with details regarding share allotment, expected share price, and board members available. Reliance Industries has appointed Hitesh Kumar Sethia as the Managing Director and CEO of Reliance Strategic Investments Limited.

The recent news concerning Vedanta follows their announcement on Friday that they would assume ownership of a joint venture with Foxconn, which was originally established for semiconductor production in partnership with Taiwan\’s Foxconn.

On Friday, the Vedanta board approved the acquisition of 100% ownership of Vedanta Foxconn Semiconductors Private Limited and Vedanta Displays, both of which are wholly owned subsidiaries of Twin Star Technologies Limited. Twin Star Technologies Limited is a wholly owned subsidiary of Volcan Investments Limited, the ultimate holding company of Vedanta Limited.

The Vedanta Foxconn joint venture recently re-submitted an application to establish an electronic chip manufacturing plant under the modified semiconductor program.

The modified program offers increased fiscal incentives of 50% of the project cost for setting up semiconductor Fabs of any nodes in India.

The Vedanta joint venture intended to manufacture chips of 40nm and then progress to 28nm on the factory line. The JV planned to invest Rs 1.54 lakh crore to establish display and semiconductor fabrication units, with a proposed ownership ratio of 63:37.

According to a note from Morgan Stanley on July 3, the JV was actively seeking a third equity partner. The consortium was also in discussions with STMicroelectronics to explore a potential technology partnership.

However, talks with STMicroelectronics reportedly stalled due to disagreements over the scope of technology transfer and the duration of the JV, with STMicroelectronics requesting a sunset clause of 5-10 years. Additionally, STMicroelectronics desired a higher contribution to investment from the Vedanta group. Government approval requires the applicant to either possess a fabrication unit for semiconductor chips in the 65-28nm range or hold production-grade licensed technologies for manufacturing 28nm chips, as stated by Morgan Stanley on July 3.

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