Mumbai: Anil Agarwal-promoted Vedanta Ltd has finalized the terms of a Rs4,000 crore bond issue at a time rising yields have depressed local debt issuances, two people aware of the development said.
The company, with business interests ranging across zinc, lead, silver, oil & gas, aluminium, copper, iron ore and power, plans to sell bonds maturing in three years at a likely coupon rate of 8.50%, the people mentioned above said on condition of anonymity.
The money raised from the Vedanta bond issue will be used for working capital requirements, general corporate purposes and to refinance debt.
In a notice to stock exchanges on Tuesday, Vedanta informed that it proposes to raise up to Rs4,500 crore in one or more tranches though secured non-convertible debentures. The company’s committee of directors will be meeting in this regard on 23 March.
“Vedanta is a marque name and bonds from the manufacturing sector usually have higher demand as they are not sold very frequently. This has helped the company to get commitments of investors, from mutual funds to insurance companies, and price the bonds at a finer rate despite a large size of the issue, especially at a time when yields have hardened,” said the first person mentioned above.
According to bond dealers, amid rising bond yields, not all companies can price bonds at a cheaper rate. Corporate bonds are priced at a premium over government bond yields, which have risen because of fiscal concerns and expectation of rising interest rates.
Rating agency Crisil has assigned AA as Vedanta’s long-term rating. On 12 March, Crisil upgraded its outlook on the long-term bank facilities and debt programmes of Vedanta to 'positive' from 'stable'.
“The revision in outlook reflects Crisil's expectation of a strengthening business profile driven by a structural improvement in aluminium profitability and expected volume ramp-up across businesses, both of which should support a greater resilience of Vedanta's profitability to a decline in commodity prices. The revision in outlook also reflects expectation of continued deleveraging over the medium term,” Crisil said in a note.
Vedanta had sold bonds in December 2017, where it raised Rs500 crore through three-year paper at 7.80%.