Impact of merging Sterlite Industries with sister concern Sesa Goa that will bring a new entity of ‘Sesa Sterlite’, showed in early morning while shares of Sterlite went down by 4 % and Sesa Goa plunged over 10%.

On Saturday, the parent Vedanta group announced that Sterlite Industries would merge the company with sister concern Sesa Goa to create ‘Sesa Sterlite’, a USD 20 billion controlling entity for simplifying its group structure.

Vedanta Aluminium along with the Madras Aluminium Company will also be consolidated into Sesa Sterlite and Shareholders of Sterlite will get three shares of Sesa Goa for every five shares held, as per the swap ratio fixed.

As per source report in the deal, Vedanta will also transfer its 38.8% holding in Cairn India to Sesa Sterlite. The parent company’s debt which will thus be lowered by 61% and Sesa Sterlite will take on debt of $5.9 billion.”

As an outcome of merger, the combined debt would be approximately Rs 68,000 crore, including the debt of Cairn India, Sterlite Industries and Sesa Goa as well as Vedanta Aluminium’s Rs 19,600-crore liabilities.

Reasoning the fall in the stocks to the swap ratio adjustment, analysts said, “Prima facie, this merger ratio appears to be slightly in favour of Sterlite shareholders. And it appears that the merger ratio is slightly detrimental to Sesa Goa shareholders.”

However the current debt of Sesa Goa would be 14 times less from the newly-formed entity ‘Sesa Sterlite’ debt, the fall is steep for Sesa Goa because it is adjusting to the new share swap ratio.

Sesa Goa, after merging with Sterlite Industries, it will lead to a new entity, Sesa Sterlite which will be the seventh-largest natural resources company in the world.