8.57% Dividend Yield: Midcap Metal Company Vedanta To Raise Rs 1,000 Crore Via NCDs; Shares Jump

Vedanta Ltd announced today that it will raise Rs 1,000 crore through the private placement of non-convertible debentures (NCDs). The decision, disclosed in a stock exchange filing, received board approval and entails the issuance of 1 lakh debentures with a face value of Rs 1 lakh each. These debentures, which are secured, rated, listed, and redeemable, will be traded on the Bombay Stock Exchange (BSE).

The announcement sent Vedanta's stock soaring, with shares rising more than 6% to hit an intraday high of Rs 476.8 per share during the board meeting. The buoyant market reaction shows investor confidence in Vedanta's strategic direction and financial health.

Earlier today, Vedanta Group Chairman Anil Agarwal spoke to CNBC TV-18, addressing market concerns regarding the significant debt burden at Vedanta Resources, the parent company. Agarwal reassured stakeholders, stating that the debt remains at a manageable level and that Vedanta Resources is well-equipped to meet its obligations.

"We have a good cash flow and a robust dividend strategy that should comfortably cover all debt payments for Vedanta Resources," Agarwal said. His comments aimed to dispel fears and restore confidence among investors about the company's financial stability.

Agarwal also confirmed that the promoter entity has no intention of diluting its stake in Vedanta Ltd. As of March 31, 2024, promoters held a 61.95% stake in the company. Despite a reduction in promoter shareholding from approximately 70% since December 2022 - including a significant equity sale worth Rs 2,165 crore in February 2024 - Agarwal assured that the holding would not fall below 61.5% in the near future.

"At this point of time, there is nothing on the cards to take our holding down below 61.5%," Agarwal emphasized, reinforcing the promoter's focus on maintaining a substantial stake in the company.

Vedanta Ltd, a prominent player in the metals and mining sector, has set a near-term goal of achieving $10 billion in EBITDA, with substantial contributions from its core segments: aluminium, zinc and silver, and oil and gas. Specifically, the company aims to generate $4.2 billion from aluminium, $2.7 billion from zinc and silver, and $0.9 billion from oil and gas.

Agarwal reiterated this guidance during his interaction with CNBC TV-18, emphasizing the company's strategic focus on expanding capacity and improving operational efficiencies.

The positive developments around Vedanta's financial strategies and growth plans have not gone unnoticed by market analysts. The stock has received a series of brokerage price target upgrades, reflecting a bullish outlook on its future performance.

Notably, CLSA highlighted the aluminium segment as a key value driver for Vedanta. The brokerage firm pointed to capacity additions, cost control measures, and a strategic shift in product mix as factors that could significantly enhance the segment's profitability.

The shares of Vedanta were seen trading with gains of nearly 6% at Rs 475.20 per share as of 1:35 pm on the National Stock Exchange (NSE). The stock has delivered returns of nearly 60% in the last one year.

For the fiscal year ending March 2024, Vedanta has declared an impressive equity dividend of 4050.00%, which translates to Rs 40.5 per share. With the current share price at Rs 472.70, this results in a substantial dividend yield of 8.57%. The company boasts a strong dividend track record, having consistently declared dividends over the past five years.

The most recent bonus issue by Vedanta was announced in 2008, with a 1:1 ratio, and the shares have been trading ex-bonus since August 8, 2008. Additionally, Vedanta last split the face value of its shares from Rs 10 to Rs 1 in 2008, and they have been quoted on an ex-split basis since August 8, 2008. The last rights issue from Vedanta occurred in 1995, with shares offered in a 1:10 ratio at a premium of Rs 90.00 per share, and the shares have been quoted ex-rights since August 14, 1995.

Vedanta Ltd's decision to raise Rs 1,000 crore through NCDs is a testament to its proactive approach to managing debt and optimizing its capital structure. The move has been well-received by the market, as evidenced by the substantial uptick in its stock price.

Chairman Anil Agarwal's reassurances regarding debt management and promoter holding have further solidified investor confidence. With robust plans for EBITDA growth and strategic initiatives in key segments, Vedanta Ltd appears well-positioned to achieve its targets and deliver value to its shareholders.