
Shares of Vedanta Ltd, which have fallen for six straight trading sessions, would again be in focus on Thursday morning after a Bloomberg report suggested that the Anil Agrawal unit was nearing a deal to demerge businesses into several listed entities. As per the report, the broad restructuring, if successful, may help Agarwal manage his group's debt load.
The report quoting sources said Vedanta has informed its lenders about the restructuring and could announce the plans in the coming days, adding that businesses such as iron ore oil and gas, steel and aluminium will be separately listed.
The report came a day after Vedanta shares plunged 6.74 per cent on Wednesday, as Moody's cut its credit rating for parent Vedanta Resources, citing not-so-meaningful progress on refinancing of upcoming debt maturities of $1 billion bonds maturing each in January and August next year.
The holdco company had to sell a 4.3 per cent stake in India-listed Vedanta for around $500 million recently to stave off some of the pressure, Moody's noted this week.
Deven Choksey, Managing Director of KRChoksey Shares and Securities said Vedanta Resources has already pledged its entire share holding in Vedanta and their share of 64 per cent in Hindustan Zinc and, therefore, has limited ability to demerge other units given the charge of creditors on cash generating assets, particularly of Hindustan Zinc.
"Vedanta Resources is in catch 22 situation with mismatch on repayment of debt ( total $ 5.6 billion in following 2 years ). In my view they should be bringing in equity investor in the group as against debt swapping being done all this while. It will also help them win over the confidence of market on VDL. When debt swapping is done by bringing equity investor, it would also mean that the group will build it huge for future opportunities in commodities business. Having said, it would be a mistake to not tap equity investor at this stage also since there is significantly large appetite for india investment by global investors," Choksey said.
Vedanta shares are down nearly 12 per cent in the six-day fall. As per the Bloomberg report, Vedanta Resources would remain the holding company. Deliberations are ongoing, it said adding that no final decisions have been made on the structure or timing of the de-merger.
Resolving a byzantine corporate construct, as per the report, has been a priority for years for Agarwal’s indebted Vedanta Resources, but a global increase in borrowing costs has raised the stakes, it said.
Moody's had earlier noted that Vedanta Resources' credit quality was constrained by weak liquidity, thanks to large refinancing needs and interest expenses. Moody's said as Vedanta Resources’ entire shareholding in Vedanta and that Vedanta's entire 64.9 per cent shareholding in Hindustan Zinc, which holds around two-thirds of the group's consolidated cash, have already been pledged, Vedanta Resources has limited financial flexibility to raise financing.