Anil Agarwal-led Vedanta Ltd has prepared a war chest of Rs 30,000 crore with recent funds raised through a qualified institutional placement (QIP), offer for sale (OFS) and dividend to pursue further deleveraging and growth, sources said.
Proceeds from the Rs 8,500-crore QIP of Vedanta Ltd, HZL’s OFS of Rs 3,200 crore, and Rs 5,100 crore from the second interim dividend, coupled with existing cash reserves of Rs 13,000 crore, will lead to the creation of a Rs 30,000-crore war chest after the company receives all the funds, sources said. Vedanta may deploy this war chest for accelerated deleveraging of its balance sheet, improving capital structure, development of its transformational projects paving the way for its near-term USD 10-billion dollar EBITDA target and pursuing inorganic opportunities, an analyst said.
Vedanta continued to deliver strong quarterly numbers. For the first quarter, profit after tax grew 54 per cent year-on-year (YoY) and more than doubled on a quarter-on-quarter basis to Rs 5,095 crore.
The company recorded highest-ever alumina production at Lanjigarh and mined metal product at the Zinc India unit. It brought down the overall cost of production by 20 per cent YoY due to structural changes and other initiatives. The mining major’s debt stood at Rs 6,130 crore as of June 30. The proceeds generated from the private placement of non-convertible debentures as well as promoter stake sale between February and June (cumulatively 4.4 per cent) will also contribute to the debt reduction at the group-level in the near-term.
A combination of strategic stake sale, debt reduction and optimizing operational efficiencies indicates Vedanta’s move towards deleveraging and generating free cash flows is on track, sources added. Two major events — the proposed demerger and a series of transformational projects — is expected to help the company continue this trend.
The company’s ongoing investment in these projects will help increase volume, integration, and enhancing the range of value-added products across businesses. Similarly, the company is on track with its demerger after receiving no-objection certificate from secured lenders and the stock exchanges. It has filed the scheme with the National Company Law Tribunal (NCLT).
The de-merger, which is planned to be a simple vertical split, will enable value unlocking and attracting big-ticket investment into the expansion and growth of each of its demerged businesses. By further simplifying its corporate structure, the demerger will create sector focused independent businesses that will provide investment opportunities to Indian and global investors, including sovereign wealth funds and strategic investors.
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