Vedanta parent raises $1.25 billion loan; stock falls

Shares of Vedanta remained in focus today amid a report that its parent, Vedanta Resources Ltd (VRL) secured $1.25 billion from private credit lenders for debt refinancing. This loan came just in time as billionaire Anil Agarwal-led company was looking to refinance its $1 billion debt maturing in January 2024. In total, the London Stock Exchange-listed miner faces a daunting task of $3.8 billion bond repayments over the next three years, which include $1 billion in January 2024, $0.95 billion in August 2024, and $1.2 billion in March 2025.

In a separate development, Vedanta on Wednesday informed the exchanges that its board will meet on December 18 to consider and approve the second interim dividend on equity shares for the financial year 2023-24. In May this year, Vedanta had declared its first interim dividend of ₹18.50 per share for FY24. The company has a good track record of paying dividend and has declared an equity dividend of ₹51.50 per share in the last 12 months. Since July 2001, the miner has declared 40 dividends.

Early today, Vedanta shares opened higher at ₹256 after closing 2.7% higher at ₹253.20 on Wednesday on the BSE. In the opening trade, the mining stock gained as much as 1.8% to ₹257.70, but soon pared gained and slipped into negative terrain. In the first hour of trade so far, the stock declined as much as 1.7% to hit a low of ₹248.85, while the market capitalasation dropped to ₹93,506 crore. At the current share price, the dividend yield stands at 20.33%.

Vedanta shares have witnessed rollercoaster ride in the calendar year 2023, with the stock price hitting 52-week high of ₹340.75 on January 20, 2023, while it slipped to its 52-week low of ₹207.85 on September 28. In the last one year, the stock has fallen nearly 20%, while it lost 19% on year-to-date (YTD) basis. The counter has fallen 10% in six months, while it rose over 5% in a month.

Last month, Crisil downgraded the long-term bank facilities and debt instruments of Vedanta amid rising concerns about financial flexibility of the firm, which had already witnessed a reduction in liquidity since last fiscal. The rating factored in the recent plan to demerge its businesses into separate listed standalone entities as well as the impending debt refinancing risk at VRL. It also factored in the delay in refinancing the upcoming debt maturities of parent company VRL beyond the expected timelines of October 2023.

CRISIL lowered ratings of Vedanta’s long-term bank facilities and debt instruments to ‘CRISIL AA-’ from ‘CRISIL AA’ and revised its rating watch to 'Rating Watch with Developing Implications' from 'Rating Watch with Negative Implications'. “The rating downgrade reflects the increased likelihood of Vedanta’s consolidated financial leverage (ratio of net debt to EBITDA) for the current fiscal remaining higher than the rating thresholds of 2.7 times. This is because successful completion of the company’s plans to deleverage the balance-sheet through inorganic route of asset monetisation is expected to be behind the earlier expected timelines for the fiscal,” it said in a report.

Earlier in October, S&P Global Ratings and Moody's Investors Services downgraded Vedanta Resources' ratings. S&P Global downgraded VRL to "CCC" from "B-" on potential bond extensions and also placed it under ‘credit watch’. A CCC rating indicates higher vulnerability in meeting its financial commitments. While Moody's cut VRL’s corporate family rating (CFR) from ‘Caa1’ to ‘Caa2’, citing elevated risks of debt restructuring.

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