Vedanta plans a $3-billion debt reduction at holding company level (Vedanta Resources) by FY27 through brand fees and dividends from subsidiaries and no additional debt for Vedanta Ltd. It is also likely to monetise its steel and iron ore assets, while the promoters are not averse to bringing down their stake in Vedanta Ltd to generate more cash.

The management spoke to analysts late on Tuesday.

The debt of Vedanta Resources is expected to reduce to $6.2 billion by the end of the current fiscal year, according to Nuvama Institutional Equities, which attended the analyst call. The company plans to use the cash flow from brand fees and dividends from subsidiaries to reduce debt, but that will likely not be enough.

Nuvama expects ₹16,300 crore from the monetisation of steel and iron ore assets, likely by the first quarter of FY25.

The expected cash flow is $1.3 billion from brand fees and $4.5 billion from dividends over the next three years. There is no plan to raise brand fee as a percentage of revenue of Vedanta and Hindustan Zinc.

Vedanta Resources restructured bonds worth $3.1 billion in January, pushing its maturity by two years to FY27. Over the last two years it has already deleveraged its balance sheet by $3.5 billion. Its debt obligations in FY25 and FY26 is estimated at $1.6-$1.8 billion in each of the years, Nuvama said.

Reducing stake in Vedanta Ltd is also an option. Between March 2023 and February 2024, promoters have sold 7.8 per cent stake, mobilising ₹7,400 crore and bringing down the stake to 62 per cent.

Nuvama said in its commentary that it would be better if the promoters sold up to 11.9 per cent stake to a strategic investor rather than in bits and pieces in the open market.

Vedanta Ltd’s expansion of its aluminium and international zinc business is expected to be completed during FY25 and once these plants are fully ramped up, it would have the potential to generate over $1 billion in cash flows annually.