Metals and mining conglomerate Vedanta Resources will repurchase in cash bonds worth USD 500 million (about Rs 3,300 crore) out of its outstanding USD 1.13 billion convertible bonds due in July this year.
Global ratings agency Moody's said that while the repurchase cannot be treated as a distressed exchange, additional discounted note repurchases may be treated as one.
Earlier this week, the firm with businesses ranging from metals to oil said it "proposes to purchase up to USD 500 million in aggregate principal amount outstanding of bonds" on the terms and subject to the conditions in the Tender Offer Memorandum.
The London Stock Exchange-listed firm said it's inviting holders of the outstanding bonds to tender them for purchase for cash at a price to be determined pursuant to a modified Dutch auction.
This is a type of auction in which the price on an item is lowered until it gets a bid.
The offer commenced on January 11 and will close on January 18.
On Vedanta's offer, Moody's Investors Service said the tender offer on convertible bonds maturing in July 2016 is unlikely to be treated as a "distressed exchange".
However, the agency's final treatment of the offer will depend on the settlement price, which will be clear when the offer closes on January 18.
Moody's sees the contemplated deal as "an opportunistic buyback" since the issue of default avoidance is currently unclear, pending the emergence of clarity on the purchase price, says Moody's Vice-President and Senior Analyst Kaustubh Chaubal.
"However, a distressed exchange could materialise if the note-holder losses exceed current expectations, estimated based on current market prices."
Vedanta Resources has not indicated any further buybacks, Chaubal said, adding that "additional discounted note repurchases may be treated as a distressed exchange when viewed in combination with the current proposed transaction".
Although the offer does not affect Vedanta Resources' rating, the agency said persistent weakening in energy and metals prices since November 2015 has added to the pressure.
The offer impacts only around 3 per cent of Vedanta Resources' total outstanding debt, it said.
The offer will be conducted as a modified Dutch auction and allows the company to increase or decrease the offer amount, Moody's added.
"The tender offer will be funded from the term loan raised at Vedanta Resources Plc and the funds received through the part repayment of an inter-company loan by Vedanta Ltd," it added.
The JP Morgan Securities and Standard Chartered Bank are acting as dealer managers for the offer.
Asked if controversies like the debate on intolerance and
JNU row deter foreign investors, Agarwal said such things also happen in England and there are issues like racism in America.
"But, being a democracy you can't stop this," he said. "Definitely they have an effect. But if you simplify the process this thing will not affect."
"With two-third majority, the BJP-led government's intention to take the country forward is absolutely there. "They are very keen to get foreign investors. I would say that the Indian entrepreneur is the best bet for them," Agarwal said.
"They should create more Indian entrepreneurs and support the existing ones. Foreign investors, of course, are very important, but what Indian entrepreneurs can do is more. They have created telecom companies, established ports, bridges, etc. They can bring in bigger investors from outside through collaboration," he said.
Agarwal said all that is not touching the government is progressing like IT services industry, pharma and software.
"India is a democratic country and nowhere in the world democratic countries run businesses, except in India," he said referring to large presence of government through state-owned enterprises in businesses spanning hotels to mining.
In US and Europe, 80 per cent of the enterprises are board-run corporations and 20 per cent are family run businesses. "India hardly has any corporation. You have ICICI Bank, Larsen & Touubro, HDFC and ITC, just it," he said.
India, he said, is a land of entrepreneurs -- young, vibrant.
"You have to allow them to come in (to set up businesses in) very simple manner," he said adding Vedanta is only natural resources company in India while the country needs at least 10-15 more such firms to come.
Agarwal said the current oil low price scenario is time to reflect how costs can be cut by bringing in better engineering and better products.
"And I'm very pleased and believe that if we hold this ground for a while, we will be the biggest winner because we are a long-term player. I always tell my people that everybody is going to die, but we must die last," he said when asked about impact of low oil and commodity prices on his companies.
He said his companies are still making profits. "If you see, oil prices have recovered, iron ore prices are recovering and so are zinc prices. And as we are low cost, we will last longer.
