“About $ 250 million will be raised through unused loan facility from asset management firm Oaktree and about $ 550 million through new bank loans,” Nomura said in a report released Tuesday on plans to financing of Vedanta.
The Oaktree facility is at an interest rate of 13% and the bank loans are at an all-inclusive interest cost of 9%, according to the report.
On Monday, the conditions sheet said the company’s promotion companies, Twin Star Holdings and Vedanta Netherlands Investments BV, were offering to buy around 170 million shares at an offer price of 350 per share.
On Tuesday, the two promoter entities acquired 13.79 crore of shares, or 3.71% of equity worth 4,822 crore from the mining conglomerate of metals. The shares were bought at 349.70 per share on NSE via block trades, according to NSE data.
Vedanta Netherlands Investment bought five crore shares, Twin Star Holdings acquired 8.79 crore shares.
While analysts view this move as positive for Vedanta Resources, debt is likely to rise.
“The cost of convenience is a significant addition to high cost debt. The latest stake acquisition will bring the debt of the holding company of Vedanta Resources to more than $ 10 billion, by our estimates,” Nomura said in its statement. report.
However, with the new acquisition, the shareholding of promoters is expected to drop from 65.18% to around 70%. While answering a question earlier about splitting some of its activities, Vedanta chairman Anil Agarwal told ET that one of the delisting goals has already been resolved.
“It’s natural to make these companies independent so they can grow. And we wanted to go off the listing, but we increased our stake to around 65%, so a target is set,” Agarwal said.
Some analysts, however, say these rampant acquisitions are a prelude to a delisting from Vedanta.
“The next step is probably a write-off. The important factor here is that even if the debt increases at the level of the parent company, if the company is written off, the leakage of dividends from Hindustan Zinc to the minority shareholders is controlled and the all of the profit is passed on to VRL, ”said one of the analysts at a listed brokerage firm.
Vedanta Ltd recently announced that it is considering a spin-off of its aluminum, iron and steel and oil and gas businesses, which will be managed as stand-alone listed entities with separate management as part of its value creation process.
While some analysts find the current rampant acquisition contradicting the company’s restructuring move, some say they are two independent plans.
“Last week he announced that he was undertaking a ‘comprehensive review’ of the structure of the company … This announcement and today’s stake purchase deliver mixed messages and so we are not sure of the eventual business strategy, ”Nomura said in his report.