Vedanta Resources' near-term liquidity risk as it seeks funds: S&P

Anil Agarwal-controlled unit looks to raise $700 mn from Indian lenders

Rating agency Standard and Poor’s (S&P) on Thursday said liquidity stress has decreased for Vedanta Resources as the company has addressed a large part of its debt maturities for financial year 2022-2023 (FY23).

While Vedanta Resources still has some funds to raise, it has adequate cash held at subsidiary Vedanta and will benefit from established banking relationships. However, Vedanta Resources' weakened access to capital markets and persistent refinancing needs constrain the rating, S&P said.

From needing to refinance about $3 billion at the start of the financial year, Vedanta Resources' debt maturities for the rest of the financial year are now about $1.3 billion. The company will meet about half of the remaining amount due in FY23 through further dividends from Vedanta, and the rest will be refinanced, it added.

Vedanta Resources is looking at raising additional funding from Indian banks, similar to the $700 million it had raised in May and June from State Bank of India and Canara Bank.

Further, $300 million of debt due in December is at intermediate subsidiary Twin Star Holdings. Refinancing this debt should be relatively easier than the debt at the Vedanta Resources level, as evidenced by recent refinancing initiatives. The Twin Star debt is from the company's key relationship banks.

Beyond this financial year, the next key debt maturity for Vedanta Resources will be $900 million of bonds due in April and May. The company is likely to look at refinancing options later this year.

Even if Vedanta Resources is unable to raise funding for the bonds, it should be still able to meet the bond repayments through dividends from Vedanta.

The rating agency estimated that Vedanta will have consolidated cash of slightly more than $3 billion as of March, of which 80 per cent will lie at its subsidiary Hindustan Zinc. Following the bond redemption, Vedanta Resources has no material debt maturity until January 2024.