Vedanta Limited announced an interim dividend of $1.56 billion, of which $1.02 billion will go to the holding company, Vedanta Resources Limited.
Vedanta Limited announced an interim dividend of $1.56 billion, of which $1.02 billion will go to the holding company, Vedanta Resources Limited.
Moody’s Investors Service on Monday said a huge dividend from its cash-rich India operating subsidiary has boosted billionaire Anil Agarwal-led Vedanta Resources Ltd’s efforts to refinance debt.
On 28 April, mining company Vedanta Limited announced that its board of directors has approved an interim dividend of ₹11,710 crore ($1.56 billion), of which $1.02 billion will be received by its holding company, Vedanta Resources Limited (VRL).
VRL holds 69.7% stake in Vedanta Limited.
Moody’s said, “The large cash dividend is credit positive for VRL as it offsets some of the liquidity and refinancing risk associated with the holding company’s debt maturities in the first half of the fiscal year ending March 31, 2023 (Financial 2023).” ” An issuer comment.
At the same time, VRL has initiated a tender offer to buy up to $500 million in cash from its $1 billion senior unsecured notes maturing in July 2022.
If the bonds are submitted by the initial tender deadline of May 11, 2022, the notes will be bought back at par.
Alternatively, they will be purchased at a discount of 2% on face value for bonds tendered after the initial tender deadline of May 11, but before May 25, 2022.
“VRL’s major debt maturities of $4 billion for fiscal year 2023 include $2.75 billion at the holding company level alone, including a balance of $1.3 billion in various operating subsidiaries,” Moody’s said.
Of the holding company’s $2.75 billion of debt maturities, $2.1 billion is payable during April-September 2022 and the remaining $650 million is repayable during the remainder of the year.
VRL’s cash requirements include intercompany debt repayment of $300 million in the first quarter of fiscal year 2023 and a large interest bill that has climbed up to $800 million annually.
“The expected $1 billion dividend receipt from Vedanta Ltd. will, therefore, help mitigate only some of the immediate cash needs of the company,” it said.
While Vedanta Ltd’s large cash dividend is credit positive, VRL’s negative rating outlook remains unaffected as it still needs substantial cash for the remainder of the financial year.
“We anticipate that the recently announced dividend and certain new bank loans and rollovers will help the holding company meet its liquidity requirements during the first half of fiscal year 2023, but not beyond, indicating our view. assumes that the liquidity risk will remain persistent.
“VRL has another $2.9 billion in debt maturities in FY 2024,” it said.
Dividends from its cash-rich and relatively less leveraged operating subsidiaries, and regular reliance on bank credit, will remain particularly relevant amid tight liquidity in capital markets and rising yields on VRL’s existing US dollar bonds.
“VRL has been placed in a weak position in the Corporate Family rating of B2, as reflected in its negative outlook, which is a result of the holding company’s scarce liquidity. In the absence of its weak liquidity, VRL’s operations favor favorable underlying demand. and are well positioned with commodity prices that support continued positive free cash flow generation,” the rating agency said.
During FY 2022, Vedanta Ltd., which is largely responsible for overall income generation in VRL, generated operating EBITDA of $6 billion, up 66% from $3.6 billion in the previous financial year.