The Vedanta stock gained three percent in the afternoon trade on January 11. Domestic brokerage Nuvama Institutional Equities issued a "buy" rating for the stock, saying the successful debt restructuring at the parent company, Vedanta Resources, removed a major overhang on the counter.
In another positive development for the company, subsidiary Cairn Oil & Gas, a subsidiary, said it submitted the first Field Development Plan (FDP) to commence gas production from its Jaya block in Gujarat.
At 2.20 pm, Vedanta was trading at Rs 271.4 on the NSE, up 1.6 percent from the previous close.
Vedanta Resources has restructured bonds worth around $3.15 billion dollars, which were maturing in FY24 and FY25. “The restructuring comes at a higher cost, but gives the parent company a two-year breather to focus on ongoing aluminium/zinc capex and monetisation of steel & iron ore assets, which would unlock incremental cash flows,” said Numava.
Vedanta Resources will pay $779 million upfront, with a consent fee of $68 million, thereby pushing maturities to FY27 onwards. This, in turn, will give the company liquidity flexibility, which it can use to fund its capex. However, the high dividends will sustain, with DPS of around Rs 40 expected in FY25 and FY26. “While consolidated net debt shall stay high, it is likely to peak out in FY25E,” the brokerage said.
Vedanta is also working on monetising its steel and iron ore assets in India. The assets can be sold at an enterprise value of around Rs 12,100 crore, which will further boost liquidity, it said. Promoters can still offload up to 13.6 percent stake to revert to 50.1 percent stake in Vedanta, providing additional liquidity.
“On the whole, we believe Vedanta is moving in the right direction; upgrade to ‘BUY’,” Nuvama said, with a target price of Rs 362, implying an upside of 39.2 percent.
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Cairn Oil & Gas submitted an FDP to produce more than 2,000 barrels of oil equivalent per day from the Jaya block, which has the potential to help meet the company's goal of doubling its production capacity, it said.
This is the first FDP that has been submitted under the Open Acreage Licensing Policy (OALP)regime. The government awarded 144 blocks to various companies under the OALP regime, which provides a single, uniform licence for exploration and production of conventional as well as unconventional hydrocarbon resources.
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