Reuters: With Foxconn pulling the plug, Vedanta's debt load is larger than it had anticipated

12 Jul 2023 , 11:37 AM

According to Reuters, Foxconn and Vedanta pulled the brakes on a chip-making joint venture because of concerns from the Indian government and the Taiwanese company over Vedanta’s financial status.

The parent company of Vedanta Ltd., Vedanta Resources, based in London, has struggled with a mounting debt load and still owes $2.2 billion in debt for the fiscal year that began on April 1. About $4.2 billion in total debt repayment is scheduled in FY24. 

The business has already paid $2 billion toward this in the first quarter. Total principal obligations of $1.3 billion, interest, and intercompany loans make up the remaining $2.2 billion. This $1.3 billion includes a $1 billion bond that is due in January 2024.

The company is mostly relying on brand monetization, refinancing, and the transfer of general reserves to retained earnings to achieve its payback timeframes.

Recall that Foxconn, the largest contract electronics manufacturer in the world, and Vedanta agreed to establish semiconductor and display manufacturing facilities in Gujarat last year.

The electronics manufacturer stated in a statement that ‘Foxconn has determined it will not move forward on the joint venture with Vedanta,’ but did not provide any other information.

According to Foxconn, the decision to dissolve the joint venture was reached amicably by the two parties, and the company will have its name removed from Vedanta’s new fully-owned business.

The metals-to-oil giant Vedanta and Foxconn ‘mutually agreed to part ways’ on their intended semiconductor joint venture, but the Taiwanese company said on July 11 that Foxconn was still committed to India.

The Vedanta-Foxconn partnership was perceived to be stagnating for a while due to an impasse in negotiations to add European chipmaker STMicroelectronics as a partner.

STMicro had agreed to license the technology to Vedanta-Foxconn, but the government demanded that the European business must have more ‘skin in the game’—for example, a stake in the collaboration.

STMicro was not a fan of that, therefore the discussions stalled.

By 2026, India anticipates its semiconductor market would reach $63 billion. Three requests to open plants were submitted to the government last year as part of a $10 billion incentive program.

For feedback and suggestions, write to us at [e-mail]