Vedanta’s $4.1-bn debt due in FY24

We caution of execution risk. VRL’s refinancing of the $1-1.25 bn loan is not finalised yet and a lack of progress, a failure of refinancing talks, or its inability to tie up the loan for late-FY24 pose downside risks to our recommendation, says CreditSight

New Delhi: Vedanta Resources Ltd (Vedanta), the parent company of Mumbai-listed mining giant Vedanta Ltd, on Wednesday said it has further repaid $400 million of loans, cutting gross debt to $6.4 billion.

In a statement, the firm helmed by billionaire Anil Agarwal said “it has paid all its maturing loans and bonds due in May and June 2023. As such, gross debt has further reduced to $6.4 billion, a $3.3 billion reduction since Vedanta announced its deleveraging ambition in March 2022,” it said.

CreditSights, a Fitch Group firm, had last week stated that it saw lower refinancing risk for Vedanta Resources Ltd’s (VRL) near-term debt maturities on a new $850 million loan refinancing.

“Looking ahead, while we estimate more funds need to be raised to fully fund VRL’s estimated $2.1 billion of FY24 (April 2023 to March 2024 fiscal year) debt refinancing needs ($850 million covered, implying a gap of $1.25 billion), we think VRL still has multiple funding avenues to tap onto. These include share pledges and dividend upstreaming,” it said.

The firm had last on April 24 stated that it had cut gross debt to $6.8 billion after repayments. “Vedanta is targeting further debt reduction during the balance of FY24, and ultimately intends to lower gross debt towards zero,” the company statement said Wednesday.

“This will be aided by our expectations of robust demand, particularly in India, coupled with strong operational performance from our world-class asset base. Vedanta’s gross debt as of today stands at $6.4 billion, down from $6.8 billion at the end of April 2023, $7.8 billion at the end of March 2023, and $9.7 billion at the end of March 2022.

It, however, did not indicate a timeline for reaching zero gross debt. “We remain aware of refinancing risk on VRL’s $4.1 billion debts due in FY24, for which VRL will likely have to rely heavily on external fundraising for a $2.1 billion refinancing and an additional $950 million to plug a funding gap.

These avenues include pledging of promoter stake in the main operating company Vedanta Ltd and further dividend upstreaming from operating companies.