Vedanta Resources, led by veteran businessman Anil Aggarwal, is going to take a huge financial step. The company is preparing to restructure the entire debt of its holding level of about $ 5.5 billion (about Rs 45,000 crore) in one go. The company’s objective is to properly align its loan repayments with the dividends and cash flows from operating companies, so that there is no cash crunch in the future. Let us understand what is this mega plan of Anil Agarwal and what effect it will have on the company.
Talks with global banks, preparation to raise funds from 10 year bonds
According to sources with knowledge of this entire matter, London-based parent company Vedanta Resources will use a combination of long-term bonds and loans to repay this loan. The company plans to raise $3.5 to 3.7 billion through bonds with a tenure of 10 years. Apart from this, there is talk of a loan with a maturity of 5 years for the remaining $1.5 to 1.7 billion.
To implement this financial strategy, Vedanta management has held meetings with at least eight big banks of the world in the last few weeks. These banks include Citi Bank, JP Morgan, Barclays, Standard Chartered, Deutsche Bank, Mashreq Bank, First Abu Dhabi Bank and Sumitomo Mitsui Banking Corporation. However, many of these banks have refused to comment officially on this matter.
After demerger, debt will be repaid from dividends and brand fees
This big decision of Anil Aggarwal has come at a time when he has started the process of demerging five different companies from his India-listed company Vedanta Limited. The real objective behind this strategic step is to make loan restructuring easier.
Cash flow mathematics: Vedanta Resources has to repay a debt of $ 500 to 600 million every year in the next three financial years. After this, this liability will increase to approximately $ 1.25 billion in the financial year 2030 (FY30).
The company has been using annual brand fees of about $350 million and dividends of $600 to $700 million from Vedanta Limited to repay this debt. Even after demerger, the newly formed companies will have to pay about 3% of their turnover as brand fees till the financial year 2029, due to which the parent company will maintain cash flow.
Relief from the pressure of bullet repayment, rating agencies expressed confidence
In the past, Vedanta’s biggest problem was when commodity (metal and oil) prices fell and at the same time the company had to repay huge lump sum debt (bullet repayment). This time the company is working on ‘amortizing structure’. This means that instead of being repaid in one go, the loan will be divided into installments, due to which there will be no pressure on the company in any one year.
The effect of this financial discipline is now visible. Recently, rating agency S&P (S&P Global) has improved the rating of the company. The agency estimates that Vedanta Resources’ EBITDA may be $ 7 billion in financial years 2027 and 2028, due to which the company will be able to reduce its debt by $ 500 million and $ 1 billion respectively. Similarly, Fitch Ratings has also acknowledged that the company’s proactive refinancing strategy has strengthened its financial credibility. By the end of December 2025, the average loan maturity profile of the company has also increased to 4.5 years, which was just 1.3 years two years ago.
Leave a Reply