Vedanta slips 2% in a strong market after nearly 2% equity changes hands

A combined 69 million shares, representing 1.86 per cent of total equity of Vedanta, have changed hands on the NSE and BSE so far

Shares of Vedanta slipped 2 per cent to Rs 276.20 on the BSE in Friday's intra-day trade, in an otherwise strong market, after nearly 2 per cent of total equity of the company changed hands on the NSE and BSE.

At 02:14 pm, Vedanta was trading 1.5 per cent lower at Rs 277.65 on the BSE. In comparison, the S&P BSE Sensex was up 1.7 per cent or 1,006 points at 58,966 level. A combined 69 million shares, representing 1.86 per cent of total equity of Vedanta, had changed hands on the NSE and BSE till the time of writing of this report.

The board of directors of Vedanta, at their meeting held on Tuesday, March 28, 2023, had approved a fifth interim dividend of Rs 20.50 per equity share i.e., 2050 per cent on face value of Rs 1 per share for the financial year 2022‐23, amounting to Rs 7,621 crore. The record date for the purpose of payment of dividend is Friday, April 07, 2023.

In the past two months, Vedanta has underperformed the market by falling 17 per cent, as compared to less than 1 per cent decline in the S&P BSE Sensex.

CRISIL Ratings has revised its rating outlook on the non convertible debentures (NCDs), and long-term bank facilities of Vedanta to 'Negative' from 'Stable', while reaffirming the rating at 'CRISIL AA'. The rating on the commercial paper, and short-term bank facilities has been reaffirmed at 'CRISIL A1+'.

"The revision in outlook reflects possibility of higher-than-expected financial leverage, and lower financial flexibility with reducing ratio of cash surplus to 1-year maturities for fiscals 2023 and 2024. This is due to increased cash outflow from Vedanta, in the form of dividends, towards large maturing debt obligations at its parent company viz. Vedanta Resources (VRL; rated 'B-/Stable' by S&P Global Ratings). This is owing to increased refinancing risk at VRL and moderating operating profitability (Ebitda [earnings before interest, tax, depreciation, and amortisation]) of Vedanta," CRISIL said.

VRL has annual debt maturities of around $3 billion each in fiscals 2024 and 2025, with high near-term maturities of around $1.7 billion in the first quarter of fiscal 2024. CRISIL Ratings understands that the company is in discussion with lenders for refinancing upcoming maturities of first quarter of fiscal 2024, and the same is expected to be completed by end of March 2023 or early April 2023.

That said, the progress on the refinancing plans have been slower than expected, thereby resulting in increased dividend payout by Vedanta and reduced cash and cash equivalents during the fiscal. Including the recent dividend announced by Hindustan Zinc Ltd (HZL, Vedanta’s subsidiary; 'CRISIL AAA/Stable/CRISIL A1+’), dividend payout by Vedanta for fiscal 2023 will be more than Rs 40,000 crore (highest ever, including dividend payout by HZL to its minority shareholders). This is expected to result in cash balance of less than Rs 20,000 crore for March 2023 against more than Rs 30,000 crore in March 2022.

"In case of any further delay in the expected refinancing plan, dependence on dividend payouts by Vedanta will increase; Vedanta currently has cash balances only to cover for VRL’s maturities for the first half of fiscal 2024, and hence will be a key rating sensitivity factor,: CRISIL said in its rating rationale.