Vedanta shares in focus as company board to consider dividend today

Shares of Vedanta Ltd would be in focus on Monday as the company board considers a proposal of dividend payment later in the day. The Anil Agarwal company had on May 17 told stock exchanges that the record date for the purpose of determining the entitlement of the equity shareholders for the said dividend, if declared, would be Tuesday, May 30, 2023. If declared, it would be the first interim dividend by Vedanta for FY24.

In FY23, the company declared total dividend of Rs 101.50 per share. Its cash and cash equivalents stood at Rs 20,922 crore at the end of financial year.

For FY24, Vedanta did not provide any guidance on dividend payment, said Motilal Oswal Securities. It noted that the company's net debt stood at Rs 44,500 crore, up 115 per cent YoY due to dividend payout and higher capex. This brokerage has a target of Rs 280 on the Vedanta stock.

Vedanta's FY23 dividend payout helped reduce debt at parent Vedanta Resources, said Systematix Institutional Equities, which said dividend is likely to remain elevated at Rs 60-80 per share over FY24 and FY25 driven by a sharp reduction in energy costs, especially for coal, implying a yield of 22-29 per cent providing strong downside support.

Vedanta may continue pay high dividend in FY24E and FY25E, said Nuvama Institutional Equities. This brokerage has factored in dividend per share of Rs 45 each for FY24E and FY25E. Vedanta is awaiting final approval from lenders to shift Rs 12,590 crore from general reserve to retained earnings, which will help in dividend payment, it noted.

Kotak Institutional Equities, however, said higher dividends a unsustainable. It said that an increase in net debt has been led by high dividends (Rs 101.50 per share) paid out in FY2023 and estimated standalone net debt/Ebitda increasing to 4.2 times in FY2023.

"Such high dividends are unsustainable. Capex of Rs 20,000 crore in FY2024E suggests negative FCF and dividends would increase debt proportionately. Parent VRL has sold 1.6 per cent stake in the market to partly fund its repayment requirements in March 2023. VRL has $2.1 billion repayments left in FY2024E and $3 billion is due in FY2025E. We note the concerns around parent leverage is likely to remain an overhang and drive Vedanta capital structure in the medium term," it said.

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