Vedanta Resources repays $1.4-bn bonds; brings down debt to $6.4 bn

Vedanta Resources, the parent firm of Vedanta Ltd, on Wednesday, said it 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 this year.

“We are very comfortable with Vedanta Resources’ debt and its debt-to-equity ratio and have no plans to reduce stake in Vedanta Ltd to raise funds,” said Anil Agarwal, chairman of the Vedanta group, at a town hall of Vedanta Ltd shareholders. 

Vedanta’s shares closed 2.5 per cent down at Rs 278 apiece on Wednesday, giving it a market valuation of Rs 1.03 trillion. The company lost 13.3 per cent or Rs 15,891 crore of market valuation over the past year.

 

The Vedanta group aims to reduce its debt further in 2023-24 (FY24) and ultimately have it at zero. It has reduced gross debt by $3.3 billion since it announced a deleveraging target in March 2022. VRL’s gross debt was $9.7 billion at the end of March 2022, a Vedanta statement noted.

In FY23, Vedanta Resources received Rs 25,636 crore as dividends from Vedanta Ltd which were partly used to repay debt, analysts said. VRL owns a 68.1 per cent stake in Vedanta Ltd, which in turn holds a 63 per cent stake in Hindustan Zinc.

The parent firm also raised fresh loans worth $850 million from JPMorgan Chase and Oaktree Capital. It separately raised $250 million from rival Glencore International. 

Agarwal said the group has good relations with Glencore, which is a key customer of the group, and said there are no plan to sell a stake to Glencore.

“Vedanta has a complete business plan to take care of debt and the target is to have zero debt in the next few years,” Agarwal said. “All the payments have been made in the past and will be made in the future.”

Analysts expect new loans to carry higher interest when compared to Vedanta Resources' existing bonds. In return, the group has pledged its entire stake in Vedanta Ltd and its subsidiary, Hindustan Zinc Ltd to lenders.

Analysts said they remain aware of refinancing risk on VRL’s $4.1-billion debt due in FY24, for which VRL will likely have to rely heavily on external fundraising for a $2.1-billion refinancing and an additional $950 million to plug a funding gap. “At this point, we would still lean towards VRL being successful at tying up its $2.1 billion of fundraising, given VRL’s recent debt reductions, recent fresh fundraising efforts (the recent $850-million refinancing loan and a just-announced $250-million loan from Glencore International pledged against a 4.4 per cent stake in Vedanta Ltd) and that we think various alternative funding channels remain open for VRL (e.g. share pledges and some dividend upstreaming)," said analysts with CreditSights, a research firm.

Fully equipped to make chip: Agarwal

The Vedanta group is fully equipped for making semiconductors, Anil Agarwal said, after media reports stated that its application to manufacture semiconductors in India was not cleared by the government. The site for the semiconductor factory has been selected in Gujarat and the company is working with the government on the project, he said. “The world doesn’t want us to make semiconductors. There will be hurdles after hurdles because the world wants us to buy the semiconductors from them, but Vedanta wants to build here,” Agarwal said.