Vedanta faces do or die battle if corporate restructuring exercise fails amid losses, debts

NEW DELHI: Vedanta Ltd, the metals to mining conglomerate, may find it tough to survive if its corporate restructuring exercise fails as the group is faced with burgeoning debt on one hand and falling revenues on the other, analysts said.

Vedanta's restructuring hinges on the successful completion of the delisting of the company's shares from stock exchanges, which is critical as the current structure is inefficient and difficult to sustain in the challenging environment and also contributes to its lower rating, they said.

Vedanta Resources, the parent, has mobilised USD 3.15 billion for the delisting exercise, resulting in total debt of the group swelling to over Rs 1,25,000 crore. At the same time, two critical businesses of copper and iron ore are non-operational due to legal and regulatory issues.

"In fact, the debt is highest among peer companies like Tata Steel, Hindalco, JSW Steel and others. As a result, while Vedanta is under severe pressure to meet its debt obligations in a timely manner, it is also being buffeted by sharp deceleration in demand in the commodities space due to COVID-19, with pressure on oil prices and subdued metal prices," an analyst said.

Further, two key businesses of Vedanta -- its 4,00,000 tonnes per annum copper capacity at Tuticorin in Tamil Nadu and the iron ore business in Goa -- remain shut with little visibility on when they would resume operations.

He said that this has also dented the group's overall revenues. When contacted, Vedanta spokesperson refused to comment on the debt position or impact on revenues due to the shutdown of copper and iron ore businesses.

The spokesperson also refused to comment on the likely delisting price or if the group could raise more money to fund this exercise, calling it speculative. However, sources said that the lenders have put a cap on any further fund mobilisation.

The maximum Vedanta can offer in the buyout exercise is Rs 125-127 per share against the book value of Rs 89 a share. Vedanta closed at Rs 137.45, up 0.4 per cent, on BSE on Thursday. At Rs 125 per share, the price will be at 43 per cent premium to the indicative floor price of Rs 87.5 a share.

While Vedanta has been able to mobilise USD 3.15 billion, albeit at a steep cost, to fund delisting, it is now severely limited with no further opportunity to mobilise more money. Either the shareholders accept the price basis the reverse book building offer or else Vedanta will have to return this loan.

The bid opening date has been fixed on October 5 and it concludes on October 9.