Vedanta Ltd., led by Anil Agarwal, witnessed a dip to a level not seen in over fourteen months in anticipation of its board meeting scheduled for September 21. The stock touched a low of Rs 227, a level last recorded on July 15, 2022.
As of 10:10 am, the stock was trading at Rs 229.50 on the BSE, marking a 1 percent decline from its previous close. Over the course of this year, the stock has experienced a significant drop of more than 25 percent.
During the board meeting, discussions will revolve around the issuance of non-convertible debentures (NCDs) through private channels as part of routine refinancing efforts.
In a recent report by Economic Times, Vedanta Resources is engaged in advanced negotiations with global private credit funds like Bain Capital, Davidson Kempner, Ares SSG Capital, and Cerberus Capital to secure a short-term loan of $1 billion.
Vedanta Resources faces substantial bond repayments of nearly $2 billion in FY25, contributing to a total debt repayment of $3.6 billion in the upcoming financial year. The issuance of NCDs could potentially aid in servicing these bond repayments.
Vedanta Resources currently grapples with high leverage and a $3 billion funding gap projected for FY25, as highlighted by Kotak Institutional Equities. While the parent company has implemented one-time measures, including a 6% stake sale in Vedanta, to address the funding gap for FY24, the $2.2 billion bond maturity scheduled for FY25 presents a more formidable financial challenge.
The company has traditionally relied on dividends from its Indian unit and Hindustan Zinc. In FY2023, Vedanta Ltd. distributed a dividend of Rs 101.5, surpassing the proposed delisting price.
Kotak analysts suggest that Vedanta may need to reconsider significant dividend payouts and explore the sale of subsidiary stakes or assets. They also emphasize the risk of reduced earnings due to a challenging commodity cycle, maintaining a ‘sell’ rating and reducing the target price by 7% due to unfavorable risk-reward. Bloomberg data indicates limited optimism among other analysts, with only three out of 14 brokerages issuing a ‘buy’ rating, while five recommend ‘hold,’ and six advise ‘sell’ for Vedanta’s stock.