Cash-strapped Vedanta is in talks with global investors to raise between $1.5 billion and $2 billion and the funding proposal is expected to be closed soon. Similarly, another Indian conglomerate, the Shapoorji Pallonji Group (SP Group), seems to be looking to raise $2 billion through asset sale or pledging of shares in Tata Group.
Vedanta also plans to raise funds through issue of non-convertible debentures (NCDs) to meet its debt repayment obligations.
Crisil Ratings recently revised the outlook of Vedanta’s NCDs and long-term bank facilities to negative from stable, citing higher financial leverage and lower financial flexibility.
Vedanta Resources, the parent company of Vedanta, has annual debt maturities of about $3 billion each in FY’24 and FY’25, with high near-term maturities of $1.7 billion in the first quarter of fiscal 2024, said Crisil Ratings.
Refinancing plan
The company is in discussion with lenders for refinancing upcoming maturities in the first quarter of this fiscal and the same is expected to be completed by early April, it said.
The progress on the refinancing plans have been slower than expected, thereby resulting in increased dividend payout by Vedanta and reduced cash and cash equivalents during the fiscal. Including the recent dividend announced by Vedanta’s subsidiary Hindustan Zinc, dividend payout by Vedanta for fiscal 2023 will be over ₹40,000 crore (highest ever, including dividend payout by HZL to its minority shareholders),” it said, adding this is expected to result in cash balance of less than ₹20,000 crore for March 2023 against over ₹30,000 crore in March 2022.
In case of any further delay in the expected refinancing plan, dependence on dividend pay outs by Vedanta will increase. Vedanta currently has cash balances only to cover for VRL’s maturities for the first half of fiscal 2024, and hence will be a key rating sensitivity factor.
However, Anil Agarwal, Chairman, Vedanta recently dismissed concerns about the payment for upcoming debt maturities worth $900 million by June this year and termed $1 billion as peanuts. The company’s commodities businesses are throwing off enough cash and is expected to register $9 billion profit across the group for the coming year, he had said.
Meanwhile, Shapoorji Pallonji Group is seeking a buyer for its holdings in Afcons Infrastructure Ltd., a Mumbai-based infrastructure construction company, according to Bloomberg. SP Group is also looking to sell its Gopalpur Port on the East coast of India to raise funds. SP Group has been selling assets over the last 12 to 18 months in a bid to bring down its overall debt.