Capital is necessary for growth, says Vedanta Resources

Billionaire Anil Agarwal's Vedanta Resources Ltd on Thursday said capital is necessary for growth and nation-building and companies borrow keeping in view growth prospects and ability to repay. Continuing its efforts to convince the investor community about debt being within manageable limits, Vedanta in a post on Linkedin said the company has always met its repayment commitments on time and has full capability to repay.

Earlier this week, the firm, which is the majority owner of Mumbai-listed mining and oil and gas company Vedanta Ltd, had said it is in the advanced stage of finalisation to tie up USD 1.75 billion through a combination of syndicate loan and bilateral bank facilities.

Vedanta Resources said it has pre-paid all of its debt that was due for repayment till March 2023, deleveraging by USD 2 billion in the past 11 months. Further, it is confident of meeting its liquidity requirements for the quarter ending June 2023.

"Capital is necessary for growth and nation-building. All, including sovereign, individuals and companies borrow keeping in view growth prospects and, therefore, the ability to repay," the company said. Vedanta has a robust record of raising over USD 35 billion in capital, and has always met repayment commitments on time. "We have a tremendous asset base which delivers high cash flows. There is full capability to repay. With the ongoing expansions, we expect our revenue to be USD 30 billion in the near term," the company said in the post.

"All Vedanta's companies are professionally run by top CEOs and the best international experts. The company operates at the lowest costs and is on a high growth trajectory. We will continue to be a partner in and contributor to India's remarkable economic rise," it said.

Earlier this month, S&P Global Ratings stated that the company's credit ratings may "come under pressure" if it is unable to raise USD 2 billion and/or sell its international zinc assets. Vedanta Ltd (Vedanta Resources has 70 per cent stake) has proposed sale of the international zinc business to Hindustan Zinc Ltd (Vedanta Ltd has 65 per cent ownership) for nearly USD 3 billion.

The government is averse to the deal as it is a related party transaction and will hit its own share sale plan. Valuation of the assets is among several concerns flagged by the government, which holds a 29.54 per cent stake in HZL, which was privatised more than two decades ago.

"Vedanta Resources Limited has pre-paid all of its maturities due till March 2023 and has deleveraged by USD 2 billion in the past 11 months. Thus, it has achieved half of its USD 4 billion 3-year debt reduction commitment in the first year, ahead of its plans for this fiscal," the company had said in a statement earlier this week.

"We would like the investors to note that Vedanta group operating companies, underpinned by strong operating profitability from diversified and low-cost tier-1 assets, are delivering healthy cash flows whilst maintaining disciplined capital allocation".

During FY22, Vedanta Limited delivered an EBITDA of USD 6.1 billion and free cash flow (pre-capex) of USD 3.6 billion. "Vedanta Resources is fully confident of meeting its upcoming maturities in quarter ending June 23. We have multiple options for both refinancing as well as repayment through internal accruals. We are in advance stage to tie up required financing through a USD 1 billion fresh loan from a syndicate of banks. We are also close to finalise USD 750 million bilateral facilities with various relationship banks. The remaining liquidity requirements can be addressed internally," it said.

Vedanta Limited, the subsidiary of Vedanta Resources, does not have any pledge except 6.8 per cent of Hindustan Zinc Limited's shares. "Over the past 20 years, Vedanta Resources has raised more than USD 35 billion and has an excellent track record of debt servicing. Vedanta remains confident of servicing its debt obligations through multiple options including capability to make payments through internal accruals at all times," the statement added.

S&P had stated that 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 USD 1.5 billion of the USD 2 billion the parent requires between April and June, including inter-company loans and interest expenses," it had said.

Debt maturities next fiscal include USD 500 million of loan repayments in the quarter ending December 31, 2023 and a USD 1 billion bond in January 2024. Vedanta has a portfolio comprising zinc (the world's largest integrated producer), aluminium (India's largest producer of primary aluminium), oil and gas (India's largest private producer of crude oil), silver (6th largest producer globally), battery metals: Nickel (India's sole nickel producer) and cobalt, copper, iron ore and steel and commercial energy.

Vedanta said it is India's largest diversified natural resources company. In India, it is the largest producer of zinc, largest producer of aluminium, second largest producer of oil, second largest commercial miner of iron ore and a significant contributor to gas and silver. It is now foraying into semiconductors and display glass.

"As a company, Vedanta is purpose-driven. Just like how India achieved self-sufficiency in agriculture and food several decades ago, it must now achieve atmanirbharta in minerals and oil & gas that occur below the ground. Vedanta is committed to helping India achieve this objective," it said.

The company said it has always cared for all stakeholders and is one of the highest contributors of tax to the exchequer, paying USD 34 billion in the last 7 years. It has rewarded shareholders with the highest dividend yield paying out over USD 9 billion in the last decade. "Most of all, we are committed to the environment, to our communities and transparency in our functioning. We ranked second in the global Dow Jones Sustainability Index, a recognition of our ESG priorities. Soon, we plan to meet 25 per cent of our energy requirements through renewables with a 4GW installed capacity," it added.

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