Vedanta Resources, the India-based natural resources company, has announced that it has paid off all its maturing loans and bonds due in April and reduced its gross debt by $1bn to $6.8bn from $7.8bn in March. The company’s founder and chairman, Anil Agarwal, had announced plans in February 2022 to reduce debt by $4bn within three years, and this latest move takes Vedanta 75% of the way towards this goal. The company’s statement said it expects strong operational performance from its asset base, combined with commodity prices, to lead to further deleveraging during the balance of FY24.
Agarwal has expressed his aim to make Vedanta Resources a zero-debt company, which he describes as a medium-term, achievable goal. Vedanta did not disclose the source of the funds used to pay off the $1bn in April. However, the company’s Indian subsidiary, Vedanta Limited, pledged 2.44% of its stake in group company Hindustan Zinc to raise Rs 1,500 crore, including the repayment of existing debt.
According to rating agency Crisil, Vedanta Resources has annual debt maturities of around $3bn each in FY24 and FY25, with high near-term maturities of $1.7bn in the first quarter of fiscal 2024. The company is reportedly in advanced negotiations to raise $1.5-2bn from US hedge fund Farallon Capital Management.
Vedanta had earlier proposed to sell its global zinc assets to Hindustan Zinc for almost $3bn. However, the Indian government, which owns 30% of Hindustan Zinc, has opposed the move. Hindustan Zinc CEO Arun Mishra has said that the plans to buy the overseas assets have not yet been called off, but they are still subject to board approval.
In conclusion, Vedanta’s latest announcement to pay off maturing loans and bonds and reduce its debt by $1bn represents a significant step towards its goal of becoming a zero-debt company. The company’s strong operational performance and commodity prices, combined with the potential for further fundraising, could enable it to achieve its debt reduction targets in the coming years. However, the proposed sale of its zinc assets to Hindustan Zinc remains subject to board approval, and the Indian government’s opposition to the move could yet prove to be a significant obstacle.
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