Vedanta plans to issue $1.5 billion dividend, lifting parent's bonds

Vedanta Ltd. will issue Rs 11,710 crore ($1.5 billion) of dividends to shareholders, triggering a rally in the bonds of its parent that will use the income to pay down debt. 
 

Vedanta will pay a dividend of Rs 31.50 a share to investors, it said in an exchange filing Thursday. That will provide some relief to its parent Vedanta Resources Ltd., which faces a wall of maturities, beginning with a $1 billion note due in July. 

Separately, Vedanta Resources announced a tender offer to buy back as much as $500 million of its dollar notes due in July, it said in an exchange notice in Singapore. The company said it will use about half the $1 billion it receives as dividend from the Indian unit. 

The parent firm’s dollar bonds rose the most in six weeks Friday, with the notes maturing in July hitting the highest level since October, according to Bloomberg-compiled data.  

Billionaire Anil Agarwal’s Mumbai-listed company paid out about $2.2 billion to shareholders in the year ended March. S&P Global Ratings had flagged last month that dividends from Vedanta Ltd., which is 70%-owned by its London-based parent, will likely contribute to a large part of Vedanta Resources’ debt servicing as refinancing over the next six months becomes more challenging. 

“If the past is an indication, looking at the profitability, one may expect that dividend will remain high,” Ajay Goel, acting chief financial officer, said in a post-earnings call. It will help the parent cut debt by $4 billion over the next three years, he said.

Reduction of the parent’s debt will be front loaded, with at least $1 billion coming this fiscal year, Sunil Duggal, Chief Executive Officer of Vedanta Ltd., said on another post-earnings call Thursday.  

Net Income Falls

Meanwhile, group net income dropped nearly 10% from a year earlier to 58 billion rupees in the January-to-March period, the Indian unit said. That would be the first year-on-year decline in profit since the quarter ended September 2020. It also missed analysts’ estimate.

Industries across the world have been grappling with higher energy and commodity costs that have been exacerbated by Russia’s war in Ukraine as supply chains get upended. Locally, Indian mills are finding it difficult to secure thermal coal supplies, especially aluminum producers, as the government diverts the fuel to the power sector.

Shares of Vedanta rose 1.6% in Mumbai Friday, extending the year’s gains to nearly 23%. Analysts have 13 buy recommendations on the company, 3 holds and 2 sells, according to data compiled by Bloomberg.

Key Numbers

Sales advanced 41% to 393.4 billion rupees, while expenses rose nearly 33%, with material and power costs rising more than 50% year-on-year.
 

The company’s net debt fell nearly 24% to 209.79 billion rupees as of March 31 from a quarter earlier.
 

Vedanta will spend $2 billion on projects across key businesses.
 

Vedanta’s aluminum output rose 8% from a year earlier during the quarter, and steel output increased by 3%, while oil and gas production fell 7% and power sales declined 16%.
 

Unit Hindustan Zinc Ltd. last week reported an 18% year-on-year growth in quarterly profit but missed estimates.