Is Sterlite an innocent M&A victim?

Vedanta’s troubled $9 billion bid to add Cairn India to its list of subsidiaries has caused unintended consequences for U.S.-traded Sterlite Industries.

Sterlite (SLT, quote) is another arm of the Vedanta empire, and the only one with an ADR listing.

Perhaps because of this, traders have been eager to sell SLT as a proxy for its parent company, which is having trouble closing the Cairn India deal.

Part of the problem for Vedanta is that even if its acquisition of the oil company, currently a subsidiary of Scottish Cairn Energy (CRNCY, quote), succeeds, spending $9.7 billion would effectively give Cairn shareholders control of the merged entity.

Furthermore, India’s behemoth Oil & Natural Gas Corp. (ONGC) has voiced a desire to quash the deal for strategic purposes. It is taking until October to decide.

Finally, the way Vedanta handled its bid — a small move in the open markets from captive subsidiary Sesa Goa and a possible tender offer down the road — is seen as a bad sign for its treatment of companies under its control. It may even be illegal.

However, SLT on its own terms is completely unaffected by rumblings elsewhere in the Vedanta empire. The company is profitable — earnings jumped 50% last quarter on an annualized basis — and active in booming commodities like zinc and copper.

If you are looking for an opportunity in base metals (or exposure to India’s materials sector), SLT actually looks a little cheap right now compared to names like Freeport-McMoRan (FCX, quote).

As for aluminum — a sore spot for SLT, which just lost a major bauxite opportunity — the company is actively ramping down production anyway. Given global overcapacity, it is probably not the best time to become a higher-volume producer.

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