Vedanta shares in focus today. Here's why

March 04,2024

Shares of Vedanta Ltd will be in focus on Monday morning after its parent firm Vedanta Resources said it plans to deleverage $3 billion debt over the next three years, adding that the parent has multiple avenues to meet its debt obligation and, therefore, it is not considering a stake sale actively in the near term. Vedanta shares recently received price targets in the range of Rs 250-400 as analysts felt benefits of a multitude of capex projects for volume expansion and cost reduction should start accruing from H2FY25 onwards.

Vice Chairman at Vedanta Navin Agarwal said that deleveraging is his company's priority. He said that Vedanta's cash flow pre-growth capex is estimated to be $3.5-4 billion for the financial year FY25, which would be sufficient for secured debt maturities of $1.5 billion.

"We would be deleveraging the debt of Vedanta Resources by $3 billion over the next three years," he said at a recently concluded analysts' meet

The Mumbai-based mining conglomerate said the FY25 maturities of $1,100 million and close to $750 million of interest servicing would be managed through brand fees, dividends from operating companies, asset monetisation and other strategic initiatives.

"Vedanta is a dynamic organisation that continuously evaluates its capital structure. The parent company has multiple avenues to meet its debt obligation. Hence, we are not considering a stake sale actively in the near term.

Agarwal said the recent dilution was part of a broader strategy to achieve optimal capital allocation. He expects the commissioning of growth projects will significantly enhance earnings potential, leading to a natural reduction in the cost of capital.

This transaction has sparked considerable interest among market participants, particularly foreign institutional investors (FIIs), domestic institutional investors (DIIs), and retail investors, who view it as a precursor to Vedanta's  forthcoming demerger announcement.