VEDANTA'S $13 BILLION DEBT WOES

Anil Agarwal-led group is exploring expansions, new businesses and a structural overhaul amid debt worries.

- NEVIN JOHN

IN MAY 2023, investors breathed a sigh of relief when Agarwal-led Vedanta Resources Ltd. (VRL), the holding company of Vedanta Group firms, repaid loans worth $800 million to Standard Chartered Bank and released the encumbrances (largely the locked-in shares of promoters used as guarantee) created on the shares of its flagship firm Vedanta Ltd. (VDL). The move was in line with chairman Agarwal's statement in the previous month that the group had the cash flow to service all its debt repayment obligations.

But hopes were short-lived. A couple of weeks later, VRL had to add a loan worth $850 million from Oaktree and J.P. Morgan. Around the same time, promoter entities pledged their 3.3% stake in Hindustan Zinc Ltd. (HZL), a subsidiary of (VDL), in favour of Axis Trustee Services Ltd. Soon after, promoters pledged 4.4% equity in VDL to borrow $250 million from Glencore.

Meanwhile, Agarwal’s other attempt to utilise cash reserves in HZL (around ₹16,500 crore at that time) through the sale of certain zinc assets parked in other group companies (in a $2.98 billion deal) to HZL failed to draw shareholders’ approval.

Since the pandemic, almost the entire promoter stake in VDL has been pledged — including the 50.1% stake of the Agarwal family classified as non-disposal undertaking (NDU) to confirm to lenders that promoters won’t exit the business. The promoter holding in HZL has also been pledged almost fully (99.37%) as on March 2024. It also included the 50.1% NDU, clubbed with pledged shares in the stock exchange filing format, says a source in the know.

The culmination of the refinancing and the pledging saga was the sale of 1.76% stake in Vedanta Ltd., held by promoter arm Finsider International Co., for ₹1,737 crore in February.

A Bumpy Ride