Vedanta On the Path of Deleverage: What is the Firm Doing?

The upcoming FY-25 can be a transformative year for Anil Agarwal-led metals, mining and energy conglomerate, Vedanta Ltd. as it sets clear plans for deleveraging and demerger the business into 6 different units.

Business model

The Anil Agarwal-led conglomerate has a portfolio of assets among Indian and global companies with metals and minerals – zinc, silver, lead, aluminium, chromium, copper, nickel; oil and gas; a traditional ferrous vertical including iron ore and steel; and power, including coal and renewable energy; and is now foraying into manufacturing of semiconductors and display glass.

What Has been said?

Anil Agarwal, known as the “Metal King” the Chairman of Vedanta Resources Ltd on a note to shareholders said, “As we step into the new fiscal year, we have set targets that reflect our pursuit of sustainable growth while maintaining a healthy balance sheet, the group will also be deleveraging its cash-starved flagship Vedanta Resources Ltd. by $3 billion in the next three years.” 

Current Debt Situation

The group has an outstanding debt of $6.4 billion, including $4.5 billion that becomes due in FY25. The group has been attempting to extend the maturities of its debt and make amendments to certain bond terms. In January, Vedanta Resources announced it has secured the backing of its bondholders to restructure portions of its debt that become payable imminently.

Future Plans

As the Chairman, Anil Aggarwal said FY25 is going to be a transformative year for the company, It significantly depends on two major frontiers which are its plans of Deleveraging and Demerging. 

Vedanta Resources Ltd, The parent company of Vedanta Ltd has deleveraged its balance sheet by over $3.5 billion in the last two years, The company is set to deleverage Vedanta Resources Ltd by $ 3 billion in the next 3 years and the group has also approached several lenders both Globally and in India for this further deleveraging.

Last year, Anil Aggarwal also announced the future demerger plans of Vedanta Ltd into 5 different business units, As per the demerger plan, for every share of Vedanta Ltd, investors will receive one share in each of the five new businesses—aluminium, oil and gas, power, steel and ferrous, base metals and an incubator for new businesses including semiconductors.

Conclusion: The deleveraging and demerging plans look promising for the Company and the streets also reacted positively to the demerging plans last year, The stock is up by more than 70% from there and currently trades at Rs.389 a piece as of 18th April and with successful deleveraging plans ahead the future outlook for Vedanta Limited looks more promising.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.