"Vedanta Group: A Struggle for Survival Amidst Financial Turmoil"

Once known as a prominent mining giant, the Vedanta Group now finds itself in the midst of a financial nightmare, just after the Adani group's recent fiasco. All eyes have turned to Vedanta Resources Limited, the holding company of Vedanta Limited and Hindustan Zinc, based in London.

With a massive $1 billion bond due in January 2024 and $500 million of loan repayments looming by December 31, 2023, the over leveraged group is in a very risky financial situation.

In the past, Vedanta easily raised funds and boasted positive cash flow. However, declining cash reserves at its operating subsidiaries have become a major cause for concern. Despite reducing its total debt from around $10 billion to $7.7 billion last year, lenders remain wary.

S&P Global Inc warns that if Vedanta fails to raise $2 billion through fundraising or sell its international zinc assets to Hindustan Zinc in the near future, its credit rating may suffer.

The group's debt is currently split into two parts: Vedanta Resources, with around $8 billion, and Vedanta Limited, responsible for the remaining $7 billion-plus.

The total debt obligation of Vedanta Resources limited as of this year is as follows:

One potential solution was Hindustan Zinc,

wherein Anil Agarwal holds a 64.92 % stake. Vedanta considered selling its mines in South Africa and Namibia to Hindustan Zinc, which could have raised approximately $3 billion.

However, the Indian government, holding a 29% stake in HZL, opposed the proposal, citing concerns about valuation.

In the face of adversity, Anil Agarwal embarked on an innovative plan to overcome these obstacles.

Last year, Vedanta Limited paid a record dividend of Rs. 37,758 crores, exceeding its cash and cash equivalents of Rs. 20,922 crore as of March 2023.

Even though this move helped Vedanta Resources announce a $3 billion debt reduction in April, it ended up straining the fundamentals of Vedanta Limited and prompting credit rating agencies to revise their outlook for the subsidiary.

Similarly, Hindustan Zinc depleted its cash and reserves after declaring a dividend of Rs. 26 per share, totaling Rs. 75.5 in dividends throughout the year. As Vedanta Limited owns a 64.92% stake in Hindustan Zinc, the company is expected to receive approximately Rs. 20,710 crores in dividends. To meet its debt obligations, Vedanta passed on the dividends to its parent company through a dividend of around Rs.18.5 per share.

While this maneuver may have provided temporary relief for the conglomerate, its subsidiaries have been drained of cash and reserves, leading to deteriorated financials and concerns raised by credit rating agencies.

Does this mark the beginning of a debt-free future or signify the end? Share your thoughts in the comments below.?

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