This fiscal would be a year under “watch” for Vedanta Resources (VRL), with the firm readying for debt repayments and heightened capex, as the industry would be closely monitoring its refinancing and execution plans. Further, the Anil Agarwal-helmed firm’s plans to venture in to new segments such as semi-conductor fabrication unit and pledging of shares in group companies would be also under immense scrutiny.
As of May 25, mining major Vedanta (VEDL), a subsidiary of London-headquartered VRL, had pledged almost 95% of its holdings in Hindustan Zinc (HZL) to raise funds. This was an increase from 87.59% shares pledged as of March 31. The move came at a time when the parent was seeking to shore up funds to trim debt.
VRL’s gross debt fell to $6.4 billion as of May due to continued “deleveraging and significant” improvement in balance sheet position. Its gross debt fell by 20.40% to $7.8 billion from $9.8 billion in the 12 months to March 2023, VRL had said in an earlier regulatory update.
According to a CreditSights’ report, VRL is expected to “successfully” service its debt maturities in the next 12 months. However, the firm was “watchful” of the refinancing risk for $4.2-billion term debt due in FY24 and cautioned of execution risks as its inability to tie up funds for late-FY24 would pose downside risks.
VRL has $1.7 billion of short-term investments in various banks, quoted bonds and mutual funds as of March 31, 2023, which it could liquidate if the need arises. Pledging of residual promoter stake in Hindustan Zinc (HZL) for up to 2.7% stake would enable it to raise about $190 million of debt, and that in VEDL for up to 68.11% stake could raise about $3.8 billion of debt.
VEDL holds a 64.92% stake in HZL, which was privatised more than two decades ago, while the Indian government holds a 29.54% stake.
In FY23, VRL deleveraged $2 billion against its commitment of $4 billion deleveraging over three years, chairman Anil Agarwal said in VEDL’s annual report for FY23.
Among many of its new ventures, Vedanta Group was looking at setting up a chip manufacturing facility, an electronics manufacturing and focusing on diversifying its reserves and resources portfolio in India.
According to Moody’s Investor Service, VRL’s cash needs for the FY24 were “large”. There was a $1-billion bond maturing in January 2024, and an estimated $1.1 billion in term debt, $450 million inter-company loan and an estimated interest bill of at least $600 million.
On its part, VEDL committed to invest $1.7 billion for capex in FY24, an increase from $1.2 billion invested in FY23. The additional investment would be for growth projects.
In May, VEDL approved its first interim dividend of Rs 18.50 per share for FY24 with a total payout of Rs 6,877 crore. It had announced a total dividend payout of Rs 37,700 crore, through five issuances, in FY23 alone.
According to analysts, pledging of residual promoter stake in HZL for up to 2.7% stake would enable it to raise about $190 million of debt, and that in main VEDL for up to 68.11% stake could raise about $3.8 billion of debt.