Vedanta may issue NCDs; parent could raise $1 billion via stake sale

Vedanta informed the stock exchanges in a communication on Monday that a committee of directors would meet on April 13 to consider the issuance of NCDs on a private placement basis

BSE-listed Vedanta Ltd is planning to issue bonds, while promoter Vedanta Resources Ltd (VRL), according to banking sources, might be looking to raise around $1 billion through a sale of up to 5 per cent stake.

Vedanta informed the stock exchanges in a communication on Monday that a committee of directors would meet on April 13 to consider the issuance of non-convertible debentures (NCDs) on a private placement basis. The company, which announced a record Rs 37,700-crore dividend for 2022-23, did not disclose the amount it hoped to raise by issuing NCDs.

VRL, which owns around 70 per cent in Vedanta, was looking at the option of selling up to five per cent and had initiated talks with institutional investors for this, said banking sources. Considering Vedanta’s market capitalisation of Rs 1.01 trillion as on Tuesday, a five per cent stake sale would help raise up to Rs 5,000 crore. The company has lost around 11.5 per cent of its value since January this year. "There will be a greenshoe option if the demand is good," said a source.

An email sent to Vedanta did not elicit any response till the time of going to press.

Separately, the Vedanta group is said to be in talks with Farallon Capital to raise an additional $1 billion on the books of Zinc International, its overseas entity. Vedanta has sought the Reserve Bank of India’s permission to provide a corporate guarantee on this loan. “The group is looking at several options to repay loans and it already repaid $2 billion in 2022-23. Another $900-million loans are due by May-end which it would be able to pay,” said a banker who did not wish to be named.

According to credit rating agency CRISIL, VRL has annual debt maturities of around $3 billion in each of financial years 2023-24 and 2024-25, with high near-term maturities of $1.7 billion in the first quarter of 2023-24. These loans were expected to be refinanced and the company was in talks with lenders, CRISIL said.

VRL, the ultimate holding company of the Anil Agarwal-promoted group, holds stakes in metals & mining projects across the world. Its main business is in India, with Vedanta, the holding company of its assets in the country, owning a 65 per cent stake in Hindustan Zinc. The parent company has an annual interest expense of Rs 5,500 crore towards its outstanding debt. The adjusted debt of VRL was estimated at $7.4 billion, or around Rs 61,000 crore as on February 28, 2023. This, according to CRISIL, is because despite VRL’s debt holders having no legal recourse to Vedanta, the debt needs to be serviced using dividend outflow from Vedanta or refinanced, based on the implicit strength of VRL’s investments, primarily in Vedanta.