Sesa gets a foreign hand to cut Cairn buyout debt

$900-mn funding by Zinc International & CMT reduces debt to $5.1 bn

Billionaire Anil Agarwal’s Sesa Sterlite has received funding of $900 million from its two cash-rich subsidiaries to help it repay loans taken to buy oil producer Cairn India.

This funding from Zinc International, a subsidiary that has mines in Africa and Ireland, and Copper Mines of Tasmania (CMT), Australia, comes when Sesa Sterlite’s parent Vedanta has announced a 14 per cent fall in its earnings for the six months ended September due to a dip in prices of metals & oil and a ban on mining in two states in the country. Both the arms are wholly owned by India-listed Sesa Sterlite, which is owned by Vedanta.

A top Vedanta official said the  two subsidiaries had taken loans from Vedanta. Those loans would be set off against the latest fund infusion. “This is repayment of loan transferred by Vedanta,” said the official.

CASH COWS

COPPER MINES OF TASMANIA (earlier known as Mount Lyell Mining Company Ltd) was founded in 1883 and full-scale production began in 1896. Mount Lyell is the oldest, continually operating mining field in Australia. The copper business of Vedanta in India and Australia recorded revenues of $4.2 billion, with an operating profit of $298 million in FY13
ZINC INTERNATIONAL was created in 2010 as a result of the acquisition of Anglo American Plc’s global zinc assets – Black Mountain Mining in South Africa, Lisheen Mines in Ireland and Skorpion Zinc in Namibia. The company
recorded revenues of $890 million, with earnings before interest, tax and amortisation of $366 million in FY13

Bankers said this helped Sesa Sterlite bring down its debt by $900 million to $5.1 billion, reducing its finance costs. Vedanta had bought Cairn in December 2011 for $8.67 billion. The acquisition was financed mainly with debt and all the loans and Cairn’s equity stake were transferred to Sesa Sterlite from Vedanta.  

While Sesa Sterlite’s aluminium and iron ore business in India are floundering, the outlook for the two subsidiaries is improving with LME prices and volumes expected to pick up from next year.

After a complex restructuring, Vedanta had brought all Indian companies under the Sesa Sterlite umbrella, including Cairn India that is buying back shares from shareholders by spending Rs 5,725 crore.

Vedanta’s India operations are going through a tough time in India, with its aluminium project in Lanjigarh in Odisha on the verge of shutting down because of bauxite shortage.  

In an interview last week, Vedanta Chairman Anil Agarwal said he regretted investing $8 billion in an aluminium plant, as complex government approvals and environmental clearances were holding up projects across the country.

The company’s iron ore mines in Goa are closed following a Supreme Court ban and industry analysts expect it to be removed only by next year, with a ceiling on production.

Vedanta’s Rs 24,000-crore offer to the government to buy the residual stake in Hindustan Zinc and Bharat Aluminium is also hanging fire, following a difference of opinion between the mines ministry and the finance ministry.