Are Rivals Really Rivals? Debt-Ridden Vedanta Resources Finds Shelter In Foes
Vedanta Resources is soon to come out as a zero-debt entity, and as an answer to it, part of it's mission is backed by its rivals, Trafigura and Glencore, which assisted VRL in fundraising of 450 million dollars.
The UK-Indian diversified mining giant, Vedanta Resources, has been lately struggling to pay off its debt, as the founder Anil Agarwal is on a mission to make his firm debt-free.
Howbeit, facing challenges through traditional modes like private credits and banks, VRL chose to cling to its rivals for the ultimate resort.
In a bid to repay the huge liabilities that the company was overburdened with, Vedanta Resources had tried the fundraising effort without leaving any stone unturned, but to no avail.
That is when Vedanta Resources’ rivals, Glencore and Trafigura, across several geographies, turn up in its rescue with 450 million dollars.
From Foe To Fellow
The commodity trading establishment Trafigura Group has lend 200 million dollars to Vedanta Resources in finance. These funds would be put to use to shell out the 150 million dollar debt to the American asset management firm Oaktree.
Whereas, the Swiss mining and trading company, Glencore International AG, another counterpart of VR, offered the latter 250 million dollar funds in exchange of 4.4 per cent listing of Vedanta Ltd. shares.
Vedanta Resources signed a loan agreement with Glencore on 25 May, as VRL sought to trim debt by shoring up funds. As part of the agreement, VRL is obliged to procure actions on behalf of Richter Holding, Westglobe and Finsider International Company, the subsidiaries of VRL, as third-party obligors.
The metals and mining sector giant, Vedanta Resources, which is also the parent company of the Indian wing Vedanta Ltd. has informed the stock market disclosing the pledging of shares with Glencore International.
Nonetheless, another fresh round of finance funding has to be done round the tables for VRL with an estimate of about 1 billion dollars for the restitution of the debt. VRL is due with 13.875 per cent bonds in Q4FY24, and the borrowing would lend a hand on the same note.
$1 Billion & Peanuts
The founder, Anil Agarwal, who is currently lost in thoughts of bringing the Silicon Valley Project to fruition in the Indian base, had shrugged off the difficulties being faced by the corporation, however market analysts opined
otherwise.
That is when the mining industry was bombarded with this progressive news of borrowed settlement of debt.
With a strong air of lowering the gross debt of the organization to zero, billionaire Agarwal had even pledged his entire shareholding of 68.11 per cent in Vedanta Ltd. to raise funds, after being backlashed by the traditional
means.
Agarwal had earlier made a claim, brushing aside the challenges, stating that everyone in the market is ready to lend to the firm as funds for the repayment, and 1 billion dollars is nothing but peanuts for them.
If raising funds were as easy as buying peanuts for Anil Agarwal, then most likely the company would not have stood in the face of such huge debt crises.
The irony lies in the facet of ‘everyone’ presumed to be at the verge of lending, but only the rivals succeed in doing so.
A great lesson one can learn from this development of Anil Agarwal chaired Vedanta Resources is that, be good to your friends, but even more good to your enemies, so that when need arises and friends fall back, your enemies muster the courage to pick you up.
Receding Debt Scenes
In April 2021, Vedanta Holding Mauritius, along with Finsider International Co. Ltd. and Westglobe had jointly raised 750 million dollars from Oaktree, which came to be known as the Oaktree Box Borrowing. This enormous borrowing was also against the shares pledged by Vedanta Ltd.
With 250 million dollars of the borrowing repaid, Vedanta Resources in now preparing to settle up the remaining amount of 150 million dollars to Oaktree.
Although disproportionate talks of the VRL debts has been going hammer and tongs, yet Agarwal persistently voices out that never even once during the last 25 years has the company defaulted.
As of 31 March 2023, the gross debt of Vedanta Resources stands at 6.4 billion dollars, and is in a retreating scene as compared to last year’s total of 9.7 billion dollars.
The reduction in the debt amount is also equally owed by the substantial dividends financed by the child entity Vedanta Ltd, which was then up-streamed to Vedanta Resources.
As much as five dividends amounting to Rs. 37,730 Crore were backed by Vedanta Ltd in FY23, out of which Rs. 25,700 Crore was rerouted to the parent entity.
May month witnessed Vedanta Resources holding 65.18 per cent stakes in Vedanta Ltd in contrary to 68.11 per cent in the month of March.
Vedanta Resources also paid off more than 800 million dollars to Standard Chartered in May, after successfully reducing its debt value by about 3.3 billion dollars in April.
With an aim of accelerating its loan repayments, Vedanta Resources has set a target of scaling down its debt by 4 billion dollars within three years.
Proofread & Published By Naveenika Chauhan
