Vedanta Board To Meet On September 21 To Consider NCDs Issuance; $5.8 Billion Debt Due Date On The Horizon

Billionaire Anil Agarwal-backed metals and mining giant, Vedanta is looking to raise funds through the option of non-convertible debentures. The company's board will meet on September 21 to take a call on the NCDs issuance on private placement. The move also comes when the due date of Vedanta's debt repayment to the tune of $5.8 billion is on the horizon.

In its regulatory filing, Vedanta said, "We would like to inform you that the Company proposes to hold a meeting of its duly constituted Committee of Directors on Thursday, September 21, 2023, to consider the proposal for issuance of Non-Convertible Debentures on a private placement basis as part of its routine refinancing that is undertaken in ordinary course of business."

Vedanta is believed to have significant funding gaps in FY25 and the company is seen to be running out of alternatives.

In its research note earlier this month, Kotak Institutional Equities said, "VRL has largely addressed the funding gap for its FY2024 debt maturities through (1) front-ended large dividends and brand fees, (2) a divestment of a 6% stake in VEDL and (3) deferment of a $450 million intercompany loan from VEDL."

However, Kotak pointed out that debt repayments of $3.6 billion due in FY2025, including $2.2 billion bonds, pose a significant funding gap of $3.1 billion, equivalent to 29% of VEDL's MCap. It said, "Refinancing of bonds, given the bleak macros, should be challenging and this could force VRL to opt for less desired alternatives."

On Monday, Vedanta shares ranged from Rs 238.35 apiece to Rs 236.20 apiece on BSE.

In another development, Vedanta announced that Mines Secretary, Government of Goa initiated an action against its wholly-owned subsidiary Sesa Resources Limited ('SRL') for unauthorized extraction of stones. The ministry has directed SRL to pay Rs 15 lakh as a penalty. It said, "There is no material impact on the financial,
operation or other activities of Vedanta."

Last week, in another report, Kotak maintained SELL's recommendation on Vedanta shares as margins of the aluminium segment to contract in the coming quarters on lower LME prices and limited incremental cost reduction-based trends in thermal coal prices. The brokerage has set a fair value of Rs 200 per share on Vedanta.

Vedanta has topped this chart consistently for the past few fiscal years. The stock has paid a dividend of 69 per share in 12 months, with the latest being Rs 18.5 dividend per share. It has a dividend yield of 29%, making it the highest dividend yield firm.

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