Vedanta chief makes zero debt pledge, says very comfortable servicing debt

Mining mogul Anil Agarwal has said his Vedanta group has ample cash flow to service all its debt repayment obligations and that it aims to become a "net zero debt company" in 2-3 years.

Agarwal said questions over Vedanta's debt servicing ability are "absolutely irrelevant" as the group will make USD 9 billion of profits next year on revenue of USD 30 billion, which would be sufficient to meet all obligations.

The comments by the former scrap metal trader turned industrialist come at a time when scrutiny of highly leveraged Indian conglomerates grows following a US short seller attack on the Adani group.

"We have the lowest debt in the world for a group of our size," Agarwal, founder, and chairman of Vedanta Resources, told PTI in an interview here.

And the debt is a result of investing billions of dollars across businesses, he said. "Total debt in the company is USD 13 billion. And we have a profit this year of USD 7 billion. Next year our revenue would be USD 30 billion and we will have USD 9 billion profit" across the group.

The cash flows are more than sufficient to meet debt servicing obligations.

"We are very comfortable," he said. "We have never defaulted to make any payment. We always have a plan to make the payments."

Earlier this week, Vedanta Resources Ltd, the parent company of Mumbai-listed mining giant Vedanta Ltd, said it has paid all its maturing loans and bonds due in this month to reduce its gross debt by a further USD 1 billion.

Vedanta has now reduced debt by a total of USD 3 billion since it announced in February 2022 its intention to accelerate deleveraging.

It had announced plans to reduce debt by USD 4 billion within 3 years, of which it has achieved 75 per cent of the committed reduction in 14 months.

Agarwal said it is "absolutely irrelevant" to talk about the debt payment capability of the group.

The group, whose business spans from zinc to silver, iron ore to aluminum and oil and gas, borrows the bare minimum, and "we have enough cash flow to service that debt," he said.

He went on to state that the group would be a net zero debt company in 2-3 years' time.

"At the moment the plan is that in 2-3 years we will be a net zero debt company," he said hastening to add that the group may have to borrow in pursuit of its aggressive expansion plans.

Diversified natural resources conglomerate plans building capacities in zinc, oil and gas, and aluminum businesses as it believes supply will remain a challenge in the commodities' space in the medium term.

The group, which has already invested USD 35 billion in the country so far, plans to become a USD 100-billion company by 2030.

Vedanta is also foraying into the manufacturing of semiconductor and display fabs and signed an initial pact with Apple supplier Foxconn to set up a manufacturing facility in Gujarat. India is 100 per cent import-dependent for fabs and semiconductors with domestic consumption expected to cross USD 80 billion by 2026 and touch USD 110 billion by 2030.

"Yes 100 per cent within a maximum of 2-3 years time, we will be zero debt company. But we have to do a lot in India. We have to create semiconductors (factory), we have to create display glass (factory), we have to expand our copper (business), we have to expand our aluminum (business), we have to expand oil and gas (operations), this is important. At that point, we might have to take debt (but) we have no plan (as of now)," he said.

S&P Ratings on April 3 stated that Vedanta will likely have enough liquidity until December.

US short-seller Hindenburg Research's damning report on billionaire tycoon Gautam Adani's infrastructure conglomerate this year triggered a stock market routing that had erased about USD 145 billion in his group's market value at its lowest point.

Adani group has denied all allegations by Hindenburg and is plotting a comeback strategy.

Agarwal dismissed concerns about paying upcoming liabilities, stressing his commodities businesses were generating enough cash to service debt.