Vedanta dividends to fund promoter’s debt servicing in FY23, says S&P

14 Jul 2022

Vedanta Resources, the ultimate promoter entity of Vedanta Ltd, may service half of its $1.7 bln (around 135.8 bln rupees) debt maturing in 2022-23 (Apr-Mar) through dividends from Vedanta and the rest through refinancing, said S&P Global Ratings today in its assessment of the company’s liquidity risk.

Vedanta Resources needed to service debt maturities of $3 bln at the start of the current financial year, and currently has an obligation to service debt of $1.7 bln maturing during the year, according to the rating agency.

The rating agency said that in case of the company’s inability to get refinance for this debt it will have to rely completely on dividends from Vedanta Ltd and group company Hindustan Zinc Ltd.

The promoter holding in Vedanta Ltd was 69.9% as of Mar 31 according to data from Informist Corporate Fundamental Database. The promoter entities, Twin Star Holdings and five others, held this stake collectively, and all or most of them are step-down subsidiaries of Vedanta Resources.

“We estimate Vedanta Ltd will have consolidated cash of slightly more than US$3 billion (around 239.7 bln rupees) as of March 2023, of which 80% will lie at its subsidiary Hindustan Zinc Ltd,” S&P said.

As of Jun 30 Vedanta Ltd had a 64.9% stake in Hindustan Zinc, the data showed.

The rating agency said that its assessment of Vedanta Resources' liquidity took into account the impact on earnings from a fall in commodity prices in recent months and the Indian government's imposition of a windfall tax on oil.

S&P estimates Vedanta Ltd's earnings before interest, tax, depreciation, and amortisation to be about US$5.5 billion (around 439.4 bln rupees) current fiscal 2023. The data showed that Vedanta Ltd’s consolidated EBITDA was 466.6 bln rupees in 2021-22 (Apr-Mar).

“We see the most downside in the aluminum business due to the sharp decline in prices in June, as well as higher input costs,” the rating agency said.my