Vedanta shares in focus as mining giant may declare dividend on May 22. What analysts say

Vedanta shares are in focus on Thursday morning after the Anil Agarwal-led firm said its board would consider paying the first interim dividend of FY24 on May 22, with the record date for dividend payment, if announced, to be May 30. Analysts largely estimate dividend for FY24 to be in Rs 45-80 per share range, citing parent Vedanta Resources' debt obligations. They stayed mixed on the stock's prospects, with a neutral-to-positive stance.

In a filing to BSE, Vedanta said a meeting of its board is "proposed to be scheduled on Monday, May 22, 2023, to consider and approve the first interim dividend on equity shares, if any, for the financial year 2023-24. Please note that the record date for the purpose of determining the entitlement of the equity shareholders for the said dividend, if declared, is being fixed as Tuesday, May 30, 2023," it said.

Nuvama Institutional Equities expects Vedanta to continue pay high dividend in FY24E and FY25E and accordingly factored in dividend per share of Rs 45 in 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 said.

Systematix Institutional Equities noted that Vedanta's FY23 dividend payout helped reduce debt at parent Vedanta Resources. It believes 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 consumes over 36 mt of coal across its various business and the sharp 70 per cent drop in coal prices is positive, it said.

Meanwhile, Kotak Institutional Equities noted that Vedanta's standalone net debt (ex Hindustan Zinc, Balco) increased to Rs 50,400 crore in FY2023 (adjusting for April 2023 dividend payout). Increase in net debt has been led by high dividends (Rs 101.5 per share) paid out in FY2023, it said 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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