Vedanta’s Massive Dividend Payout Sparks Rally in Parent Bonds

Vedanta Ltd said it would pay 11,710 crore dividend to shareholders, in line with its strong performance in profitability and cash flow. It will also help Vedanta Group deleverage in line with the latest capital allocation policy, the company said on Thursday.

The Vedanta Board of Directors has approved 31.50 interim dividend per share, which triggered a takeover of bonds from its parent company Vedanta Resources Ltd which will use the proceeds to repay debt.

This will bring some relief to its parent company which faces a wall of deadlines, starting with a $1 billion note due in July.

Separately, Vedanta Resources announced a tender offer to repurchase up to $500 million of its dollar notes due in July, it said in a notice of exchange in Singapore. The company said it would use about half of the billion dollars it receives as a dividend from the Indian unit.

The parent company’s dollar bonds rose the most in six weeks on Friday, with notes maturing in July hitting the highest level since October, according to data compiled by Bloomberg.

Billionaire Anil Agarwal’s Mumbai-listed company paid out about $2.2 billion to shareholders in the financial year ending March. S&P Global Ratings had reported last month that dividends from Vedanta Ltd., 70% owned by its London-based parent company, will likely contribute much of Vedanta Resources’ debt service, refinancing over the next six months. month becoming more difficult. .

“If the past is any indication, looking at profitability, we can expect the dividend to remain high,” Ajay Goel, interim chief financial officer, said in a post-earnings call. This will help the parent company reduce its debt by $4 billion over the next three years, he says.

Debt reduction at the parent company will be a priority, with at least $1 billion to come this fiscal year, Sunil Duggal, CEO of Vedanta Ltd., said in another post-earnings call on Thursday.

Meanwhile, the group’s net profit fell by almost 10% compared to the previous year for 5,800 crore in the period from January to March. It would be the first year-over-year earnings decline since the quarter ended September 2020. It also missed analysts’ estimate.

Industries around the world are grappling with higher energy and raw material costs that have been exacerbated by Russia’s war in Ukraine as supply chains are disrupted. Locally, Indian factories are struggling to source thermal coal, especially aluminum producers, as the government diverts fuel to the power sector.

Shares of Vedanta rose 1.6% in Mumbai on Friday, taking gains for the year to almost 23%. Analysts have 13 buy recommendations on the company, 3 holds and 2 sells, according to data compiled by Bloomberg.

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