London-based Vedanta Resources, helmed by billionaire Anil Agarwal, is seeking shareholders’ approval for its Indian unit next week to move funds into its balance sheet. The company intends to move the funds, which could probably be used to pay dividends, out of its reserves.
The company has convened a meeting of shareholders of its India-listed unit, Vedanta Ltd, on October 11.
According to a stock exchange notice convening the meeting of shareholders, the proposed scheme of arrangement between Vedanta and its shareholders provides for capital reorganisation of the company.
This is to provide for transfer of amounts standing to the credit of the general reserves to the retained earnings of the company.
“Steady growth in sales volume, balanced capital expenditure for continuing operations has helped the company achieve a strong track record of generating cash flows. With healthy business practices in place, the company expects that it will continue its growth trajectory and its business operations will keep generating incremental cash flow over the coming years,” it said, adding that over the years, the company has built up significant reserves through transfer of profits to the reserves.
“The company is of the view that the funds represented by the general reserves are in excess of the company’s anticipated operational and business needs in the foreseeable future, thus, these excess funds can be utilised to create further shareholders’ value….”
“The scheme is in the interest of all stakeholders of the company,” it added.
The London-based parent has been using the dividends from Vedanta to repay its debt.
Vedanta Resources holds about 70% stake in Vedanta. Dividends to Vedanta Resources from Vedanta totalled about $1.5 billion in the financial year ended March, with an additional $932 million in April, according to Bloomberg Intelligence. In July, Vedanta announced another dividend of close to a billion dollars.
The unit had Rs 12,590 crore ($1.5 billion) of general reserves as of March 31, 2021, and cash and equivalents of about Rs 34,340 as of June 30.