Vedanta pledges Rs 3.5K crore in Hindustan Zinc to refinance loans

Pledged 91% of its stake in the mining firm

Anil Agarwal-led Vedanta has pledged an additional 2.44 per cent stake worth Rs 3,500 crore in its subsidiary Hindustan Zinc (HZL) as part of its plan to refinance old loans worth Rs 10,000 crore. With this, Vedanta has pledged 91 per cent of its stake in the mining company. Vedanta holds 65 per cent stake in zinc mining firm, HZL.

Vedanta's London-based holding company, Vedanta Resources, has to repay debt worth $1 billion by June this year to its lenders, and the additional share pledge was part of the group’s efforts to raise funds before the deadline. The group was in talks with Farallon Capital to raise an additional $1.25 billion.  

Hindustan Zinc has a market valuation of Rs 1.38 trillion as of Thursday with its shares closing at Rs 327. Vedanta’s shares, on the other hand, closed at Rs 279 a share with a total market value of Rs 1.3 trillion. On April 13, Vedanta had announced raising Rs 2,100 crore by placing non-convertible bonds on a private basis

Vedanta had earlier sought the Reserve Bank of India’s permission to provide a corporate guarantee on this loan from its India subsidiary. “The group is looking at several options to repay loans and it has already repaid $2 billion in the past two years. Another $900-million is due by end of May which it should be able to pay,” said a banker who did not wish to be named.

According to CRISIL, Vedanta Resources has annual debt maturities of around $3 billion in FY24 and FY25, 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.

Vedanta Resources, the ultimate holding company of the group, holds stakes in metals and mining projects across the world. The parent company has an annual interest expense of Rs 5,500 crore towards its outstanding debt.

The adjusted debt of Vedanta Resources was estimated to be $7.4 billion, or around Rs 61,000 crore as on February 28, 2023. This, according to CRISIL, is despite Vedanta Resource’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 its investments, primarily in Vedanta.

In the financial year ended March 2023, Vedanta announced a dividend of Rs 37,700 crore, thus helping its parent to repay debt.