Vedanta will complete the sale of its steel assets by March next year, its chairman Anil Agarwal said in an interview on Tuesday. The company began the review of its steel and steel raw material business — formed through the acquisition of ESL Steel in 2018 for Rs 5,230 crore — in June.
Apart from ESL Steel, Vedanta’s steel business includes its domestic iron ore business and Liberia assets. The company has been looking to sell the assets to focus on its core mining businesses.
In an interview to CNBC TV18, Agarwal said the company will be able to meet its repayments to bondholders in January and August next year. “We are looking to reduce debt and make the company zero debt,” Agarwal said.
The company is due to make repayments of $1 billion in January and $500-600 million in August. “We are talking to bondholders, we are making them secure,” he said. Response to the sale of the iron and steel assets has been “phenomenal”, according to Agarwal and “can take care of entire debt”.
The debt would either be refinanced or the company would make the payment. “Refinancing is completely lined up,” he said.
Parent firm Vedanta Resources is reeling under outstanding debt of $6.4 billion. Last Friday, S&P downgraded the firm’s long-term rating and the issue rating on the company’s outstanding debt to ‘CCC’ from ‘B-‘ and placed it on ‘CreditWatch Negative’.
“We believe the likelihood has increased that Vedanta Resources will undertake a liability management exercise that we could consider distressed under our criteria. This is particularly due to the proximity of January 2024 bond maturity of US$1 billion, which is partially funded,” the ratings agency wrote.
Prior to that, Moody’s lowered Vedanta’s corporate family rating to Caa2 from Caa1 and the company’s bonds to Caa3 from Caa2.
On Friday, Vedanta announced a vertical split of the business into six companies. “This is the real thing, the demerger will bring wealth creation for shareholders,” Agarwal said. He added that no structure would be better than this one. “We have a low valuation and we are changing the management to bring in world-class leaders.”
Shares of Vedanta climbed as much as 5.1% , before paring that gain. It ended the day 3.73% higher. Both Vedanta and subsidiary Hindustan Zinc had surged on Friday, ahead of the demerger announcement. At least four brokers, including CLSA and IIFL, have upgraded their recommendation on Vedanta since then.
As per the proposed demerger, the existing company will be split into different entities, ie Vedanta Aluminium, Vedanta Oil and Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Ltd. Existing shareholders will receive an additional share of each newly listed entity for one share of Vedanta.