 "Vedanta")
Twin Star Holdings, Anil Agarwal-owned promoter entity, is selling a 4.3 per cent stake in its India-listed subsidiary, Vedanta Ltd, to raise up to $500 million to repay debt of parent company Vedanta Resources.
Its shares would be sold Thursday morning and has been offered at a 5 per cent discount to the Wednesday's closing price of Vedanta Ltd at Rs 272 apiece, according to terms of the transaction. The promoters currently own 68.11 per cent of Vedanta Ltd. The company’s valuation was Rs 1.01 trillion as on Wednesday.
In the past few months, Vedanta Resources, a London-based company also owned by Agarwal, has taken several steps to pay its debt and now analysts expect it to be successful at servicing its debt maturities of around $2 billion in the next 12 months.
The latest fundraising exercise by selling shares in the Indian listed subsidiary will help the promoter entity repay the debt maturing in the coming months, banking sources said.
The group promoter entities are on a fundraising spree as have raised $1.3 billion by taking a $850-million loan from JPMorgan, a $250-million loan from Oaktree Capital, a $200-million loan from Glencore, and a $200-million loan from commodity trader, Trafigura. The promoters also raised funds by getting higher royalty payments from its Indian subsidiary.
In the financial year ended March 2023, Vedanta Ltd paid a record dividend of Rs 37,758 crore to its shareholders, thus helping its parent entity repay debt.
Vedanta Ltd did not comment on the share sale.
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With the help of a generous dividend from Vedanta Ltd, Vedanta Resources repaid bonds worth $1.4 billion that were due in May and June, reducing its gross debt to $6.4 billion from $7.8 billion at the end of March 2023, the company said in May this year.
The Vedanta group aims to reduce its debt further in 2023-24 and ultimately to zero. It has reduced gross debt by $3.3 billion since it announced a deleveraging target in March 2022. Vedanta Resources’ gross debt was $9.7 billion at the end of March 2022, a company statement noted earlier.
The group still has several options to raise funds, including pledging residual Vedanta Ltd stake in Hindustan Zinc (HZL) which, according to analysts, could help raise another $190 million in debt.
According to analysts, Vedanta Resources also has access to $1.7 billion of short-term investments in various bank deposits, quoted bonds, and mutual funds as of March 2023, which can be liquidated to repay debt.
The promoter may also seek additional dividend from Vedanta Ltd, which declared its first interim dividend for FY24 totalling $830 million.
Of this, the parent entity has received a $565-million dividend on its 68.11 per cent stake in Vedanta Ltd.
"We also think Vedanta Resources’ timely debt repayments, thus far (April 2024 and May 2024 bonds repaid as planned) could support lending sentiment. While Vedanta's newly assumed $20-billion semiconductor venture raises some capex concern, we think the impact is mitigated by the project's long 5-10-year horizon. Our expectation is that Vedanta has flexibility to defer/stretch capex, given no material investments have been made to date, and that potential subsidies will significantly lower the project outlay," analysts at CreditSights stated.
