London-headquartered Vedanta Resources, the parent company of mining major Vedanta, has reduced its net debt by $2 billion in the past 11 months, ahead of its own deadline, as it intends to allay market concerns. The company will continue to reduce its $7.7-billion net debt during fiscals 2024 and 2025.
Vedanta Resources has achieved half of its $4-billion three-year debt reduction commitment in the first year alone. The company was planning to halve its debt by the end of this fiscal. The debt reduction was helped by robust domestic consumption in the fastest-growing major economy, the company’s healthy cash flows and capital allocation discipline.
During FY24/FY25, Vedanta will continue to deleverage from a net debt of $7.7 billion and plans to cover 50% of FY24 liquidity requirements internally and the balance through refinancing. Over the past 20 years, the company had raised more than $35 billion through debt and equity and yielded attractive returns to shareholders, and maintained an “excellent” track record of debt servicing, the company said in a statement.
Vedanta, a former FTSE 100 company, has a portfolio encompassing zinc (world’s largest integrated producer), aluminium (India’s largest producer of primary aluminium), oil & gas (India’s largest private producer of crude), silver (6th largest producer globally), battery metals (India’s sole nickel producer) and cobalt, copper, iron ore, steel and commercial energy.
Vedanta’s next phase of growth will be fuelled by its associated companies’ investments into semiconductors (India’s first semiconductor producer in collaboration with Foxconn), display glass (Avanstrate), renewables (through joint venture with KKR), optical fibre and transmissions.
Vedanta is set to capitalise on India’s growth, stable governance, and the strength of 1.4 billion Indians increasing their reliance on domestic production.
Earlier last week, S&P Global Ratings stated that Vedanta Resources’ liquidity hinges on its fundraising abilities and the next few weeks would be crucial for the company. According to the report, the company was “highly likely” to meet its obligations till September 2023.
However, sustaining liquidity beyond that would depend on the completion of at least one of two key ongoing transactions. These include a targeted $2-billion fundraising exercise, and the proposed sale of international zinc assets by Vedanta, in which Vedanta Resources has a 70% stake, to Hindustan Zinc (HZL), it said in a report.
Vedanta, helmed by mining billionaire Anil Agarwal, has a 65% stake in HZL.
The rating on Vedanta Resources was also likely to come under immediate pressure if neither of these transactions progresses over the coming weeks, the report had said, adding that Vedanta Resources is fully-funded till March 2023 following a dividend declared by Vedanta in January.