Vedanta Shares: Canara Bank Releases Encumbrance on 56.38% Stake

Canara Bank, acting through its London Branch, has announced the release of encumbrance over 2,204,724,753 equity shares of Vedanta Limited (VEDL), representing 56.38% of the company's total share capital. This significant corporate action follows the full repayment of a USD 200 million facility, for which a no-objection certificate was issued on July 3, 2025. The disclosure, made under Regulation 29(2) read with Regulation 29(4) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, marks a notable development concerning the financial arrangements of Vedanta's promoter group entities.

Action Details and Process

The released encumbrance pertains to a facility agreement dated June 28, 2022, where Twin Star Holdings Ltd. acted as the borrower, with Vedanta Resources Limited (VRL) and Welter Trading Limited as guarantors. Canara Bank, London Branch, served as the original lender and agent for this USD 200 million facility. The encumbrance, as defined under Chapter V of the Takeover Regulations, was created over the equity shares of Vedanta Limited held by its subsidiaries: Twin Star Holdings Ltd., Welter Trading Limited, Vedanta Holdings Mauritius Limited, Vedanta Holdings Mauritius II Limited, and Vedanta Netherlands Investments B.V.
The process for this release commenced with the full repayment of the aforementioned USD 200 million Twin Star Facility. Following this repayment, Canara Bank issued a no-objection certificate on July 3, 2025, formally confirming the release of all encumbrances created under the June 28, 2022, Facility Agreement. It is important to note that the disclosure clarifies that no direct pledge had been created by any of the Promoter Group Entities over VEDL's equity shares in relation to this specific facility agreement; rather, the conditions and arrangements fell within the broader definition of 'encumbrance' under the Takeover Regulations.

Historical Context and Remaining Encumbrance

This release follows an earlier disclosure dated June 30, 2022, which initially informed the market about the creation of this encumbrance. However, it is crucial for investors to understand that while this specific encumbrance has been released, another significant encumbrance on VEDL shares remains in force.
Canara Bank's disclosure also references a subsequent facility agreement dated September 29, 2022, for USD 100 million, where VRL is the borrower. The encumbrance created pursuant to this subsequent facility agreement and the related disclosure dated October 3, 2022, continues to be active. This means that a portion of VEDL's shares held by the promoter group remains encumbered under a separate financial arrangement with Canara Bank.

Shareholder and Market Impact

The release of encumbrance on a substantial 56.38% stake in Vedanta Limited is generally perceived as a positive development for the company and its shareholders. Encumbrances on promoter shares can sometimes raise concerns about the financial health or liquidity of the promoter group, as they indicate that shares are being used as collateral for borrowings. The release of such a large block of shares from encumbrance suggests an improvement in the financial position of the promoter group, as they have successfully repaid the associated debt.
This move could potentially enhance investor confidence in Vedanta Limited, as it reduces the perceived risk associated with the promoter's shareholding. It also provides greater flexibility to the promoter group regarding these shares, as they are no longer tied to the specific terms of the repaid facility. While the market's immediate reaction will be observed, the reduction in encumbered shares is typically viewed favorably, signaling a stronger financial footing for the company's key stakeholders. However, the continued existence of the encumbrance related to the USD 100 million facility will also remain a point of consideration for market participants.