Shares of Anil Agarwal-led Vedanta Ltd hit over fourteen months low ahead of its board meeting on September 21. The stock hit a low of Rs 227 -- a level last seen on 15 July 2022.
At 10.10 am, the stock was trading at Rs 229.50 on BSE, down 1 percent from its previous close. So far this year, it has fallen over 25 percent.
In their meeting, the board will discuss issuing non-convertible debentures (NCDs) privately, as part of routine refinancing.
The recent report by ET said Vedanta Resources is in advanced discussions with global private credit funds like Bain Capital, Davidson Kempner, Ares SSG Capital, and Cerberus Capital to arrange a $1 billion short-term loan.
Vedanta Resources faces significant bond repayments of nearly $2 billion in FY25, contributing to a total debt repayment of $3.6 billion in the next financial year. The NCD issuance could potentially be used to help repay these bonds.
High leverage and a $3 billion funding gap in FY25 are concerning issues for Vedanta Resources, according to Kotak Institutional Equities. While the parent company has taken one-time measures, such as a 6% stake sale in Vedanta, to address the FY24 funding gap, the $2.2 billion bond maturity in FY25 poses a more substantial financial challenge.
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Vedanta Resources has heavily depended on dividends from its Indian unit and Hindustan Zinc. In FY2023, Vedanta Ltd. paid a dividend of Rs 101.5, surpassing the proposed delisting price.
Kotak analysts believe Vedanta may no longer afford significant dividends and might need to sell more subsidiary stakes/assets. They also noted downside earnings risks due to a challenging commodity cycle, maintaining a 'sell' rating and reducing the target price by 7% due to unfavourable risk-reward. Bloomberg data shows limited optimism from other analysts, with only three out of 14 brokerages having a 'buy' rating, while five suggest 'hold' and six recommend 'sell' for Vedanta's stock.
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