Indian mining mogul Anil Agarwal has insisted his Vedanta group has ample funding options and that it aims to become a “zero debt company”, as scrutiny of highly leveraged Indian conglomerates grows following the Adani Group short-seller attack.
Bonds are currently junk-rated for Agarwal’s natural resources group, which is India’s biggest private miner and pitches itself as integral to India’s economic growth. It has been battling to cut its debt pile even as it expands into new business lines, including building an ambitious semiconductor facility in partnership with Apple supplier Foxconn.
“Everybody wants to finance us,” Agarwal told the Financial Times in an interview, citing Indian banks and “American funds”, which he declined to name. He said Vedanta was in talks with JPMorgan and other banks for a $1bn loan, with an interest rate of 8 to 10 per cent. Vedanta borrowed $400mn from Howard Marks’ Oaktree Capital Group in 2020.
Vedanta had “less than $13bn total debt” and becoming “a zero-debt company is not a distant dream, but a medium-term, achievable goal,” he said.
The comments by the former Mumbai scrap metal trader turned industrialist come at a bruising time for Vedanta Limited’s share price, which has tumbled 12 per cent in the past month. Yields on bonds maturing in 2026 for Vedanta Resources have spiked around 23 per cent in the past month. Agarwal shrugged off the bond market moves as being related to the “geopolitical situation”.
India’s capital markets have been rocked by short seller Hindenburg Research’s assault on billionaire tycoon Gautam Adani’s infrastructure conglomerate this year, triggering a stock market rout that had erased about $145bn in his group’s market value at its lowest point.
Agarwal dismissed concerns about paying upcoming debt maturities worth $900mn by June. He stressed his commodities businesses were “throwing off enough cash” and said he expected $9bn of profit across the group for the coming year, adding: “$1bn is peanuts for us.”
JPMorgan said in a recent research note that the current financial year would be “critical for Vedanta Resources” as it grappled with debt maturities and interest amounting to $4.1bn at the holding-company level.
“We have seen a recovery of the commodity cycle in recent months, which will improve Vedanta’s cash flows and profitability,” said Abhishek Jain, head of research with Arihant Capital. “But refinancing debt will be challenging in the current environment, and their financing costs will increase.”
Agarwal, who attempted to take his Mumbai-listed conglomerate private in 2020, has built up his oil-to-aluminium empire by snapping up distressed assets using debt, creating a host of subsidiaries. Moody’s in a recent research note called Vedanta’s resulting web of businesses a “complex structure” that has “long been a credit concern”.
Agarwal also insisted that merging his South African and Indian zinc mining assets was the “right thing to do”, less than two months after India’s government said it opposed the plan, delaying a deal that would have freed up $2bn in cash to Vedanta’s parent company through a special dividend.
Agarwal’s Vedanta Limited owns the majority 64.9 per cent stake in former state-owned Hindustan Zinc. He had planned to have Hindustan Zinc acquire South African operation THL Zinc from another Vedanta group entity, in a deal valuing the company at $2.9bn.
“We have a very large company with similar size resources in South Africa, and both are under two different managements,” Agarwal said. “Through consolidation, there is scope for significant improvement from a structure and business strategy perspective.”
He added: “It was natural to put this before the government to bring them together [in order] to run it efficiently and create the world’s largest zinc company.”
But the Indian government, which retains a 29.5 per cent stake in Hindustan Zinc, opposed the related party transaction and “urge[d] the company to explore other cashless methods of acquisition of these assets”. Credit analysts said the government had probably baulked at THL Zinc’s high price.
Agarwal said he would not move forward without the government’s approval and that discussions were continuing. “One thing is for sure: we will align with the government and then do it,” he said.
