After the Adani Group crisis, the shareholders of mines-to-metal conglomerate Vedanta are on tenterhooks on concerns over the company’s ability to raise funds for meeting its debt obligation in the coming months.
Though the holding company Vedanta Resources has recently released a statement assuaging investors’ concerns, the stock has crashed 15 per cent to ₹279 as on Wednesday against ₹328 logged at the end of January.
The Vedanta debt crisis comes on the back of the recent attack on Adani Group over its high debt and source of funding by shortseller Hindenburg. The nine listed entities of the Adani Group lost 63 per cent of their market capitalisation to hit ₹7.15-lakh crore from over ₹19.19-lakh crore as on January 24 when Hindenburg published its report.
The Vedanta group’s net debt, after adjusting the cash component of $3.5 billion, is about $11.8 billion. Last year, Vedanta Resources (VRL) had reduced its debt burden to $7.7 billion. VRL has external debt maturities of about $3.8 billion, $450 million of an intercompany loan and an annual interest bill of about $600 million.
VRL is purely a holding company without any operations. It relies on dividends from operating subsidiaries and banks for funding, as cross-border capital markets are expected to remain very challenging.
Vedanta is in an advanced stage to raise $1.75 billion through a combination of syndicated loan and bilateral bank facilities. Vedanta is fully confident of meeting its liquidity requirements for the quarter ending June, said the company.
The company does not have any pledge, except for 6.8 per cent shares of Hindustan Zinc. Vedanta Resources pre-paid all of its maturities due till March, deleveraging by $2 billion in the past 11 months, it said.
What went wrong
Last October, global rating agency Moody’s downgraded the corporate family rating of VRL from ‘B2’ to ‘B3’, reflecting high credit risk. Subsequently in the next month, VRL terminated the services of Moody’s and said the concern expressed by the rating agency was far-fetched.
S&P Global Ratings recently raised doubts about the group’s financial health, noting that its ability to meet obligations beyond September this year would depend on its ability to raise $2 billion.
In January, group company Hindustan Zinc put out plans to buy out parent company’s THL Zinc Ltd Mauritius in a deal worth $2.98 billion. However, the Centre, which owns a 29 per cent stake in Hindustan Zinc, opposed the sale and threatened to take legal action if the deal was executed.
Hindustan Zinc, which has long been a cash cow of Vedanta Group, has reserves of ₹16,482 crore and announced the third interim dividend for this fiscal at ₹13 per share in the December quarter. The company has so far, paid four interim dividends of ₹30,112 crore in this fiscal and the promoters have received 70 per cent of the dividend distributed.