Vedanta Ltd parent Vedanta Resources (VRL) is reportedly re-assessing timing for the potential sale of its dollar bonds in the wake of emerging market volatility after the indictment of Adani group Chairman Gautam Adani and his nephew Sagar Adani in a bribery case in the US and the group's scraping of $600 million bond offering.
The Vedanta dollar bond issue was to be priced on Thursday, a Business Standard report suggested noting that VRL had calls with fixed-income investors this week to market its dollar bond issuance to refinance its outstanding notes due in 2028.
VRL debt level, FY25 target
The Vedanta parent has a net-debt target of $4.5 billion by FY25-end. At its earnings call earlier on November 8, the Vedanta management noted that the parent VRL has reduced debt by $4.7 billion in the past two-and-a-half period, bringing it down to $4.8 billion, which was the lowest level in the decade. In H1FY5, VRL debt fell by about $1 billion, as per the management. This was ahead of the commitment of $3 billion cut that it suggested over three years.
VRL debt components
Vedanta's $4.8 billion debt has three components. It has bonds worth $3 billion. It has about $1 billion worth of bank loans, and the remainder about $850 million is the private facility from StanChart.
"We will refinance all the bond stacks between November and January over next three months' time. The bank loans will get refinanced, repaid as and when they become due. And finally, the PCF from Stan Chart, next installment is due sometimes in April. Net-net, overall by end of this fiscal or early Q1 next year, the cost of funding at Vedanta Resources will be single digit, debt give and take $4.5 billion," the Vedanta
In the September quarter, VRL refinanced $1.2 billion bonds. Of this, the last tranche came at 9.99 per cent yield. Overall, this refinancing was 3 per cent lower cost, resulting in annual savings of over Rs 300 crore, the Vedanta management suggested at its earnings call.
With VRL's ongoing deleveraging and other actions such as refinancing, the parent company will have a single-digit cost in the near future with interest obligations at VRL will be covered Vedanta Limited.
Adani's case
There are also concerns over the Adani group's fund raising ability, with Moody’s Ratings suggesting it would look at Adani Group’s governance practices when assessing ability to access capital following the bribery charges. It said indictment of the group’s chairman and other senior officials on bribery charges is credit negative for the group’s companies.
Some global banks are considering temporarily halting fresh credit to India's Adani group, Reuters reported quoting sources. The report added that the global banks may stay put with existing loans.