Vedanta explores refinancing, brand monetisation for timely debt repayments

Vedanta Resources (VR) has to repay a debt of $2.2 billion in the current financial year, and the company is relying on measures like brand monetisation, refinancing, and transfer of general reserves to retained earnings to keep up with the schedule of its repayment obligations, The Economic Times (ET) reports.

The total debt falling due on Vedanta Resources in the financial year 2023-24 (FY24) is about $4.2 billion. The company has already paid $2 billion in the first quarter. The remaining $2.2 billion includes principal requirements of $1.3 billion and interest or inter-company loans. A big portion of the $1.3 billion is a $1-billion bond due in January 2024, the report said.

To ensure enough funds, Vedanta Limited has increased the royalty percentage from 2 to 3 per cent beginning this year. Moreover, in its communication to its investors, Vedanta Resources Ltd (VRL) informed that it has entered into a similar royalty agreement with Hindustan Zinc and fixed the royalty percentage at 1.7 per cent, ET reported. The company can also exercise the option to stream up dividends from its subsidiaries.

Previously, Vedanta Resources had borrowed $850 million from JP Morgan and Oaktree at Zinc International, a wholly-owned unit of Vedanta Ltd. This loan had a door-to-door tenor of 36 months.

Besides this, VRL had also raised $450 million from Glencore and Trafigura. The company had announced that the funding from these two are "ordinary financing arrangements" and are not linked with respect to trade financing, the ET report said.

Citing sources, ET said that in order to create additional dividend capacity, Hindustan Zinc and Vedanta Ltd are in discussions with lenders to transfer general reserve to retained earnings.