December 14, 2023

New Delhi, India

To strengthen its financial stand, Vedanta Resources Ltd (VRL) received a $1.25 billion loan from private lenders. With this, the excess fund shall be used in debt refinancing to help in forming a stable long-term capital base.

Financial Boost Amidst Challenges

However, Vedanta, the owner of the Vedanta group, had been burdened by a $3.8 billion debt to be cleared within 3 years.︙ For example, they owe a lot; one of them is a very huge $1 billion that will fall due in January 2024, another one has a $0.95 billion due date in August 2024, and yet another is worth about $1.2 billion due in March 2025. Now is the crucial moment for the new loan that will restructure the existing and future debt obligations of the company dated back to January 2024.

Loan Details and Guarantees

VRL and its subsidiaries are giving a guarantee securing the debt of USD 1.25 billion that will fall due in April of 2026. It is secured by a negative pledge over the 13.26% equity interest that the company has in listed India-based Vedanta Ltd as well as an annual brand payment from several of its subsidiaries. The company has not revealed who the lenders are but this will help Vedanta demonstrate its capacity to access international capital markets.

Market Response and Share Performance

At first, there were good signals in the stock exchange, and Vedanta shares went up. The stock’s movement was not even as it fluctuated during the trading day. The year 2023 has seen Vedanta’s shares being on a roller coaster ride touching their recent 52-week high in January and then a low in September. However, the dividend yield is currently 20.33%.

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Board Meeting and Dividend Consideration

As an additional development, Vedanta revealed that its board will convene on December 18 in connection with determination and approval of the second interim dividend on equity shares during the fiscal year 2023-24. This is consistent with Vedanta’s history of delivering dividends every year, issuing fourty dividend slips since July 2001.

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Looking Ahead

Successful securing of loans should also enhance credibility in Vedanta’s core business. Nevertheless, there are still issues, and the firm is attempting to correct certain covenants and waivers to upgrade the bond’s credit package maturing in 2024. Soon, the outcome of consent solicitation with existing creditors will be published.

Therefore, although the $1.25 billion loan helps alleviate Vedanta’s initial financial distress, it is still burdened with significant debt burdens. The market response reflects both optimism and caution on the part of investors about what to expect from Vedantras finances. It is noteworthy that this forthcoming board meeting occurs in the context of the shifting economic environment within which the company is seeking to determine its future course in regard to its shareholder payout policy.

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