Vedanta Announces 5th Interim Dividend; FY23 Outflow Rs 37.7K Crore

The board of Anil Agarwal-led Vedanta on Tuesday approved the company’s fifth interim dividend -- of Rs 20.50 per equity share, or at 2050 per cent of the face value of ₹1 per share -- for the financial year ending March 31. It will amount to Rs 7,621 crore.

With this, the company's total dividend outgo for the ongoing financial year would be its highest ever, at Rs 37,730 crore.

The Agarwal family's Vedanta Resources (VRL), which owns a 70 per cent stake in the BSE-listed Vedanta, will use the dividend proceeds to repay a consolidated debt of $11.8 billion. Vedanta’s consolidated debt was Rs 53,581 crore and had cash and cash equivalent of Rs 32,612 crore for FY22.

Vedanta's shares closed at Rs 274 apiece; the company has a total market valuation of Rs 1.01 trillion. It has lost 13 per cent of market value since January this year.

Before this, Vedanta, so far, in the current financial year declared a total interim dividend of Rs 81 per share in four pay-outs. With the fifth dividend, the company's total outgo will be Rs 101.5 per share.

Earlier, Hindustan Zinc, a subsidiary of Vedanta, had also announced a record dividend pay-out of Rs 32,000 crore for the ongoing fiscal year. A plan by the Vedanta group to merge its international zinc business with HZL was nixed by the Indian government, which argued that the deal was not in the best interest of minority shareholders. The Indian government owns 29.5 per cent stake in Hindustan Zinc.

Vedanta Resources is also in talks with international banks, including Barclays, JP Morgan and StanChart, to raise up to $1 billion to refinance old loans, according to banking sources. The Indian company has sought the Reserve Bank of India's permission to give a counter guarantee for the loan to be taken by the parent, but no decision has been taken by the central bank, so far.

Meanwhile, CFO of Vedanta Ajay Goel resigned (effective on April 9, 2023) to pursue a career outside of the group, the company announced.

A spokesperson earlier said Vedanta is confident of meeting its upcoming maturities in the quarter ending June 2023. “We have multiple options for both refinancing and repayment through internal accruals. We are at an advanced stage in tying up required financing through a $1-billion fresh loan from a syndicate of banks,” the spokesperson said.

On March 10, Moody's downgraded VRL’s rating, citing increasing refinancing risks surrounding the holding company. The rating firm revised the outlook on Vedanta Resources as negative. “Ongoing delays in holdco VRL’s refinancing efforts and its continued reliance on dividend receipts are depleting liquidity at its operating subsidiaries,” Kaustubh Chaubal, senior vice-president of Moody's, warned. It said VRL’s cash needs for the next fiscal year ending March 2024 remain large, including cross-border bonds of $400 million and $500 million that are due in April and May 2023, respectively, and a $1-billion bond maturing in January 2024.

The rating firm said it expected Vedanta Resources to find sufficient funds through loans and dividends to address its debt maturities until June 2023. “However, VRL faces ongoing delays in obtaining funds relative to our earlier expectations amid a funding environment that remains challenging with high interest rates, scarce market liquidity and tight credit availability,” said Chaubal. “These issues expose the company to material refinancing risks and exacerbate the likelihood of a payment default or a distressed exchange.”

It said VRL has repaid around $2 billion of its debt during FY23 but maintaining liquidity and proactive liability management are more pertinent in preserving VRL’s credit quality, as opposed to debt reduction.