Another Crisis In Making? Inside The Debt Story Of Anil Agarwal & Vedanta Resources

Earlier this month, Anil Agarwal had revealed his aim to make Vedanta Resources a "zero debt company". In an interview with the Financial Times, he said that the total debt of Vedanta is “less than $13 billion” and that becoming “a zero-debt company is not a distant dream, but a medium-term, achievable goal.”

New Delhi: “Anil has always been a survivor,” that’s what Tom Albanese said about Anil Agarwal, the chairman of Vedanta Resources, one of the biggest mining companies in India that also has presence across South Africa, Liberia, and Namibia. Tom Albanese served as the Chief Executive Officer (CEO) of Vedanta Resources from 2014 to 2017.

Vedanta Resources has been one of the highly leveraged companies that have been under investors’ and authorities’ scrutiny after New York-based short seller Hindenburg Research’s attack on Gautam Adani and his business empire erased a chunk of investors’ wealth.

Earlier this month, Anil Agarwal had revealed his aim to make Vedanta Resources a “zero debt company”. In an interview with the Financial Times, he said that the total debt of Vedanta is “less than $13 billion” and that becoming “a zero-debt company is not a distant dream, but a medium-term, achievable goal.”

In the same interview, the mining mogul dismissed concerns about the payment of debt maturities worth $900 million by June, 2023. He told FT that his commodities businesses are “throwing off enough cash“, adding that he expected $9 billion of profit across the group for the coming year.

“$1 billion is peanuts for us,” FT quoted Agarwal.

VEDANTA’S DEBT REPAYMENT

In February, Vedanta Resources had slashed its debt by $2 billion amid investor concerns following Adani Group’s steep fall after the publication of Hindenburg Research’s report. The Mumbai-listed company had a net debt of $9.66 billion as of 31 March 2022, as per information available on its website.

After repayments and borrowings, the company presently has an outstanding debt of $7.7 billion of which $3 billion is due for repayment in the fiscal starting April 2023, as per a TOI report.

The company had issued a statement in which it has “deleveraged by $2 billion in the past 11 months, thus achieving half of its $4 billion 3-year debt reduction commitment in the first year alone.”

“During 2023-24 (FY24) and 2024-25 (FY25), Vedanta will continue to deleverage from net debt of $7.7 billion and plans to cover 50 per cent of FY24 liquidity requirements internally and balance through refinancing,” the Vedanta statement said.

Earlier this month, news agency Bloomberg had reported the Anil Agarwal-led firm is studying the possibility of selling less than 5 per cent of the company as a “last-resort option”. However, representatives of the company had denied it.

“Any talks of stake sale in Vedanta Ltd. is untrue and baseless,” a representative for the companies said in response to Bloomberg’s query.

Vedanta Resources Ltd has debt obligations of up to $2 billion due by June 2023, as per ET. The report, which quoted people familiar with the matter, said that the company had approached investors about a strategic stake sale of up to 10 per cent in India listed Vedanta Ltd.

The company has also approached Gulf sovereign wealth funds (SWFs) and alternative asset managers such as Abu Dhabi’s Mubadala, ADQ, Bahrain’s Investcorp, and Saudi Arabia’s Public Investment Fund (PIF), The International Holding Company (IHC) of Abu Dhabi, led by Sheikh Tahnoon bin Zayed al-Nahyan, for up to 10 per cent dilution in the company, said the ET report that quoted multiple sources.

Vedanta Ltd’s share price has fallen by 6.12 per cent in the past one month. The company said on March 23 that its board will consider the fifth interim dividend for the current financial year 2022-2023 on March 28.

“…the Board of Directors of the Company is proposed to be scheduled on Tuesday, March 28, 2023, to consider and approve the Fifth Interim Dividend on equity shares, if any, for the Financial Year 2022-23,” the company said in a regulatory filing.

The government of India has locked horns with Vedanta Resources over the latter’s move to dilute its debt through the sale of its zinc assets to Hindustan Zinc Ltd.  for a cash consideration of $2,981 million. In February, the Ministry of Mines sent a letter to market regulator Sebi saying despite being the largest minority stakeholder (29.54 per cent) in Hindustan Zinc Ltd., the government was “kept in the dark” about the deal, the Reuters reported earlier this month quoting a government official.

The government also had threatened legal action against Vedanta Resources if it proceeds with the all-cash deal, the report said mentioning a letter sent to the company, a copy of which was sent to the exchanges.