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Twin Star Holding, a promoter entity of the Vedanta group, is planning to sell a 4.3 per cent stake in its India-listed subsidiary, Vedanta Ltd, to raise up to $500 million for debt repayment.
The shares will be sold at a 5 per cent discount to Vedanta’s closing price of Rs 272 per share. As of Wednesday, the promoters currently own a 68.11 per cent stake in the company, which is valued at Rs 1.01 trillion.
In recent months, Vedanta Resources, a promoter, has taken several steps toward repaying bonds. This has led analysts to expect that Vedanta Resources Ltd (VRL) will successfully service its debt maturities of around $2 billion over the next 12 months.
The group’s promoter entities are on a fundraising spree, having recently raised $1.3 billion. This was achieved by taking $850 million loan from JP Morgan, a $250 million loan from Oaktree Capital, and $200 million loans each from Glencore and commodity trader Trafigura.
VRL also has access to $1.7 billion of short-term investments in various bank deposits, quoted bonds, and mutual funds as of 31 March 2023. Analysts believe these could be liquidated if the need arises – albeit potentially at losses from mark-to-market. The group also has the option to pledge their remaining promoter stake in Hindustan Zinc (HZL), which analysts estimate could raise another $190 million of debt.
The promoters have the option to pledge a stake in Vedanta Limited for up to a 68.11 per cent stake, which analysts at Credit Sights estimate could raise $3.8 billion of debt. However, analysts believe that some of this stake has already been pledged to raise recent debt.
The company may seek additional dividend upstreaming from Vedanta Ltd, which declared its first interim dividend for the financial year 2024, totaling $830 million.
Of this, VRL had received a $565 million dividend on its 68.11 per cent stake in Vedanta. “We also think VRL’s timely debt repayments thus far (April 2024 and May 2024 bonds repaid as planned) could support lending sentiment. While Vedanta’s newly assumed $20 billion semiconductor venture raises some capex concerns, we think the impact is mitigated by the project’s long 5-10 year horizon, our expectation is that Vedanta has the flexibility to defer/stretch capex given no material investments have been made to date, and that potential subsidies will significantly lower the outlays,” analysts at CreditSights said.
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