“Around $250 million will be raised from asset management firm Oaktree’s unused loan facility and around $550 million through new bank loans,” Nomura in a report on Tuesday on Vedanta’s funding plans.
The Oaktree facility is at a 13% interest rate and bank loans are at 9% all-in interest cost, the report said.
On Monday, the term sheet said that the company’s promoter firms Twin Star Holdings and Vedanta Netherlands Investments B.V are proposing to purchase around 170 million shares at an offer price of ₹350 per share.
On Tuesday, the two promoter entities acquired 13.79 crore shares or 3.71% of the equity capital worth ₹4,822 crore of metals-to-mining conglomerate. The shares were bought at ₹349.70 per share on NSE through block deals, as per data from NSE.
Vedanta Netherlands Investment bought five crore shares, Twin Star Holdings acquired 8.79 crore shares.
While analysts consider this move credit positive for Vedanta Resources, the debt is likely to go up.
“The cost of comfort is a large debt addition at a high cost. The latest stake acquisition will take Vedanta Resources’ holding company debt to more than $10 billion, per our estimates,” said Nomura in its report.
However, with the new acquisition, promoter shareholding is likely to go up to around 70% from 65.18%. While answering a query earlier on the demerger of some of its businesses, Vedanta’s chairman Anil Agarwal told ET that one purpose of delisting is already solved.
“It is natural to make these businesses independent so they can grow. And we wanted to delist, but we have increased our shareholding to around 65% so one purpose is solved,” Agarwal said.
Some analysts, however, say that these creeping acquisitions are a prelude to a delisting of Vedanta.
“The next step is probably a delisting. The important factor here is even though the debt is going up in the parent level, if the company delists, the dividend leakage from Hindustan Zinc to the minority shareholders is controlled and the entire benefit is passed on to VRL,” said one of the analysts from a top listed brokerage firm.
Vedanta Ltd recently announced that it is considering a demerger of its aluminium, iron & steel and oil & gas businesses, which will be run as standalone listed entities with separate leadership as part of its value unlocking process.
While some analysts find the current creeping acquisition to be contradicting the company’s move of corporate restructuring, some say that these two are two independent plans.
“Last week it announced that it is undertaking a ‘comprehensive review’ of the corporate structure…This announcement and today’s stake purchase deliver contrasting messages and hence we are unsure of the eventual corporate strategy,” Nomura said in its report.