Anil Agarwal's Vedanta pledges nearly all its HZL stake to raise funds

Fresh loan of $850 million raised from JPMorgan Chase, Oaktree

Billionaire Anil Agarwal-owned Vedanta Ltd has pledged almost its entire 64.92 per cent stake in Hindustan Zinc (HZL) to raise funds, the company’s submissions to the stock exchanges have shown.

The shares were pledged to JPMorgan Chase Bank on May 23, according to the filings. The company has been continuously increasing the pledging of its shares in HZL over the past one year, with the latest 3.3 per cent of the total equity pledged on Tuesday.

Vedanta raised a fresh loan of about $850 million in a five-year tenure deal with JPMorgan Chase & Co and Oaktree, Bloomberg reported on Wednesday. The funds were raised just days before Vedanta Resources, the London-based parent, was to repay a $500-million bond.

 

When contacted, Vedanta did not comment on the matter.

In the fiscal year ended March this year, Vedanta Ltd had paid a record dividend of Rs 37,700 crore, helping its parent to repay its debt. On May 23, Vedanta announced its first interim dividend for the ongoing fiscal, amounting to Rs 6,877 crore. Vedanta Resources owns 68.11 per cent in Vedanta Ltd, which, in turn, holds a stake in HZL.

In FY23, Hindustan Zinc paid four dividends worth Rs 31,900 crore, thus becoming a net-debt company for the first time.

In January this year, the group had proposed to merge its global zinc assets with HZL, but the Indian government, which holds a 29.5 per cent stake in HZL, nixed the plan, saying the proposal was against the interests of the minority shareholders.

With the help of dividend and the sale of stake worth $200 million in Vedanta in FY23, Vedanta Resources has repaid the loans and bonds that were maturing till April. With this, Vedanta Resources has reduced its gross debt by $1 billion to $6.8 billion.

But analysts are worried over the fate of bonds maturing later this year. A report by CreditSights, a research firm, said it was concerned about VRL’s $4.1 billion debt coming due in FY24, for which the company will likely have to heavily rely on a $2 billion fundraising. The group is in talks with Farallon Capital to raise funds, bankers said.

“We see limited room for VRL’s Opcos (operating companies) to upstream more dividends, given multiple rounds of dividend payouts that have depleted their cash balances, and that will only be partly replenished with operating cash generation during the course of the year. In turn, we remain cognizant that VRL could face a major liquidity crunch in the second half of fiscal 2024 should the $2 billion refinancing fail to materialise in the next 2-3 months,” warned CreditSights in a report on May 11.

Analysts are also worried over the falling metal prices that could impact the cash flows of the Indian operating companies.