Vedanta Aims Rs 6,000 Crore Fundraising via QIP to Tackle Debt and Boost Capital Expenditure

Mumbai: Vedanta Ltd is preparing to raise money through a qualified institutional placement (QIP) in the next couple of weeks, according to sources. This fundraising aims to reduce debt and cover certain capital expenditure needs.

Board Approval and Shareholder Consent

In May, Vedanta’s board approved a plan to raise up to ₹8,500 crore, and shareholders gave their approval in June. However, the company might end up raising around ₹6,000 crore instead. The final amount is yet to be decided.

Growth Projects and Capital Expenditure

Vedanta is involved in several growth projects with a long-term capital expenditure plan of about $8 billion. For the current fiscal year, the company’s capital expenditure target is around $1.9 billion, an increase from the $1.4 billion spent last year.

Bankers for the Deal

Citibank, JM Financial, and Nuvama are the bankers handling this deal. Some of the funds raised will be used for ongoing capital expenditures, while some may also go toward paying off high-cost debt, which could potentially increase profits and allow for higher dividends.

Dividends and Financials

Vedanta declared a high dividend of ₹29.5 per share in FY24, representing an 11% yield, with a five-year average dividend yield of 17%. This is significantly higher than the average for Nifty 50 companies.

Company’s Debt Situation

As of the end of March, Vedanta had a net debt of ₹56,338 crore at the consolidated level and a net-debt to operating profit ratio of 1.5 times. Its gross debt was ₹71,759 crore, with 82% in Indian rupees and the rest in foreign currency. The company’s term debt stood at ₹69,062 crore, working capital loans at ₹1,159 crore, and short-term borrowings at ₹1,538 crore.

Debt Reduction Efforts

Vedanta’s holding company, Vedanta Resources, had an outstanding debt of $6 billion as of March-end. It has reduced debt by $3.7 billion over two years and aims to cut another $3 billion in the next three years. Recently, a promoter group entity, Finsider International Company, sold nearly 98 million shares of Vedanta to raise ₹4,184 crore as part of these debt reduction efforts.

Demerger Plans

Vedanta has announced plans to demerge into six verticals, each housing a different business as independently listed companies. This move is expected to unlock more value for the company. Chairman Anil Agarwal recently confirmed that the demerger is on track, and Vedanta has outlined a strategic plan to achieve $10 billion in operating profit through over 50 projects across various business segments.