Vedanta pledges as collateral 2.44% more stake in Hindustan Zinc

21 Apr 2023 , 07:54 AM

Vedanta has pledged as collateral  an additional 2.44% of its shares in Hindustan Zinc (HZL), to raise more debt. The shares pledged are   valued at Rs 3,500 crore. Vedanta is raising additional debt to pay off some of its existing debt that are due for payment soon.

Vedanta has already pledged as collateral 91% of its ownership in the mining company. Vedanta owns 65% of the zinc mining company HZL.

The increased share pledge was a part of the group’s efforts to raise money before the deadline because Vedanta Resources, a holding company for Vedanta based in London, must pay back loans to its lenders totalling $1 billion by June of this year. To raise an extra $1.25 billion, the firm was in discussions with Farallon Capital. 

With its shares ending at Rs327 on Thursday, Hindustan Zinc has a market value of Rs1.38 trillion. On the other side, Vedanta’s shares closed at Rs279 a share, representing a total market value of Rs1.3 trillion. Vedanta said on April 13 that it would raise Rs2,100 crore by issuing non-convertible bonds on a private basis.

In order to issue a corporate guarantee on this loan from its India subsidiary, Vedanta had previously requested clearance from the Reserve Bank of India. ‘The group has already repaid $2 billion in debts over the last two years and is considering a number of methods for doing so. By the end of May, another $900 million is due, which it should be able to pay, according to news reports.

Vedanta Resources has high near-term maturities of $1.7 billion in the first quarter of 2023–2024, according to CRISIL, with yearly debt maturities of about $3 billion in FY24 and FY25. According to CRISIL, the company was in talks with lenders and expected that these loans will be refinanced.

The group’s ultimate holding company, Vedanta Resources, has investments in mining and metals projects all over the world. The parent business pays Rs5,500 crore in interest each year towards its outstanding debt.

As of February 28, 2023, Vedanta Resources’ adjusted debt was anticipated to be $7.4 billion, or roughly Rs61,000 crore. Despite the fact that Vedanta Resource’s debt holders have no legal recourse against Vedanta, according to CRISIL, the debt needs to be refinanced or serviced using Vedanta’s dividend outflow in order to take advantage of the implicit strength of its investments, particularly Vedanta.

Vedanta declared a dividend of Rs37,700 crore for the fiscal year that ended in March 2023, assisting its parent company in paying off debt.

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