Vedanta Resources' liquidity depends on $2 bn fundraising: S&P report

Sustaining after September 2023 would depend on completing one of two key transactions

Vedanta Resources' liquidity hinges on its ability to close a $2-billion fundraising in a few weeks, said rating agency Standard and Poor’s (S&P) on Thursday.

The company, controlled by Anil Agarwal, is highly likely to meet its obligations until September 2023. Sustaining liquidity after that would depend on completing one of two key ongoing transactions. One is the $2-billion fundraising and the second a proposed sale of international zinc assets by Vedanta Ltd to Hindustan Zinc Ltd.

Vedanta Resources holds a 70 per cent stake in Vedanta Ltd, which in turn has 65 per cent ownership in Hindustan Zinc Ltd.

The rating on Vedanta Resources (B-/Stable/--) will likely come under immediate pressure if neither of these transactions progresses over the coming weeks, S&P in a statement.

External funding after September is critical for debt maturities, which include $500 million of loan repayments in the quarter ending December 31, 2023, and a $1 billion bond in January 2024.

If the company raises at least $1.75 billion as targeted, it will be fully funded until January 2024. In this scenario, it will also have low dependence on dividends from Vedanta Ltd. until December. The cash that will be retained will support the refinancing of the January 2024 maturity.

Vedanta Resources is fully funded until March 2023, following a dividend declared by Vedanta Ltd. in January. “We estimate further dividends from Vedanta Ltd., together with management fees, can be used to meet about $1.5 billion of the US$2 billion the parent requires between April and June, including intercompany loans and interest expenses. Vedanta Resources has debt maturities of only $15 million between July and September,” said S&P.

Therefore, Vedanta Resources would need to raise a minimum of about $500 million to meet its obligations until June. Debt repayments during this period include $300 million of inter-company loans and $350 million to two relationship banks. “We believe these offer the company some funding flexibility”, it added.

Without significant fundraising, Vedanta Resources will be left with very little cash, about $500 million, after repayments.