Sterlite's exposure in Vedanta Aluminium up

Sterlite Industries has increased debt funding to Vedanta Aluminium Ltd (VAL) by Rs 674 crore, or by 8 per cent, in the third quarter on a sequential basis. With this, the total debt of Sterlite in VAL has reached close to Rs 10,000 crore.

Sterlite said that the inter-corporate deposits (ICDs) to Vedanta Aluminium, in the third quarter, rose by Rs 674 crore and have now reached a total of Rs 9,612 crore. The number was at Rs 8,939 crore at the end of second quarter of the current fiscal. Apart from this, Sterlite has an equity investment of Rs 563 crore in VAL.

Sterlite has 29.5 per cent stake in VAL and the rest 70.5 per cent is held by Vedanta Resources. Vedanta Resources has an equity investment of Rs 1,391 crore in VAL. Of the total loan of Rs 4,586 crore from Vedanta Resources, VAL repaid debt totalling Rs 2,287 crore in the third quarter, thereby cutting its debt exposure from the parent by half.

Sterlite said the Rs 674-crore funding is short-term, and VAL will return the money in the current quarter itself. It also said some portion of the Rs 9,612-crore loan would be converted into equity in such a way that it did not change its 29.5 per cent shareholding in VAL. For this, the company would go ahead with capital restructuring to reduce the debt to equity ratio to 2:3 from the current 14:1. According to Giriraj Daga and Sagar Karkhanis of Nirmal Bang, Sterlite might convert loans worth Rs 3,000 crore into equity to achieve this target.

Sterlite’s profits for the third quarter, which reported earlier this week, fell by 17 per cent to Rs 914 crore. The third quarter ended December 31, 2011, has been the worst one for VAL in the current fiscal despite a fall in the cost of production. Sterlite accounted for VAL’s loss to the tune of Rs 264 crore in the third quarter, as against Rs 102 crore in the same quarter last year and Rs 243 crore sequentially.