Vedanta secures ₹4,000 crore loan for energy expansion in India
Vedanta has secured a loan of ₹3,900-4,000 crore from the state-run Power Finance Corporation Ltd (PFC). This funding is intended to boost Vedanta's power generation capacity. The move marks a renewed focus on energy expansion in India, amid stiff competition from other large domestic corporations. The initial loan facility provided by PFC to Vedanta amounts to at least ₹3,918 crore for a term of 11 years.
Loan to expedite completion of power projects
The financial closure of this loan will hasten the completion of Vedanta's power projects. The funds will be primarily allocated to two key power plants located in Chhattisgarh and Andhra Pradesh. The London-based group has set a target to enhance the operating capacity of its power business to 4.8GW by FY27. To achieve this, Vedanta has acquired two plants—Meenakshi Energy Ltd in Andhra Pradesh with a capacity of 1GW, and Athena Power in Chhattisgarh with a 1.2GW capacity.
PFC's role and Vedanta's capital raising challenges
PFC, India's largest power-sector lender, typically provides financing to corporations with promising power projects and those manufacturing power-sector equipment. However, PFC has not commented on this deal with Vedanta. Traditionally, Vedanta raises capital through international banks or by selling equity in group firms, but has faced difficulties in raising fresh capital due to apprehensions regarding its capacity to repay parent-level debts.
Financial position and future plans
Despite financial challenges, Vedanta's borrowings surged by 22% year-on-year (YoY) to ₹75,227 crore as of December 2023 end. The company recently announced plans to raise ₹2,500 crore through the issuance of non-convertible debentures (NCDs) on a private placement basis. However, the firm's cash and cash equivalents for the third quarter dropped to ₹12,734 crore from ₹23,474 crore a year ago.
Recent acquisitions and Vedanta's power strategy
The recent financing follows Vedanta Group's acquisition of Meenakshi Energy Ltd on December 28, through an NCLT-driven insolvency process. Meenakshi Energy operates a coal-based power plant in Nellore, Andhra Pradesh, which Vedanta will utilize to supply power to merchants. In August 2022, Vedanta acquired Athena Chhattisgarh Power Ltd for ₹565 crore to cater to its captive power requirements. These acquisitions are part of Vedanta's strategy to expand its energy generation capacity.