On 11 October, Vedanta Ltd.’s shareholders will vote on the motion to draw money from the mining major’s cash reserves to pay dividends. The cash will likely be used to issue a special dividend of INR 33-35/share ($0.41-0.44/share) which was announced previously on September 16. These dividends will serve as an important source of funding for its London-based parent, Vedanta Resources, which will be able to use it to repurchase $900mn of its bonds due 2023. Vedanta Resources currently has a $11.7bn debt load with a lot of its debt increases coming on the back of rapid acquisitions of other metal companies. The dividend payout is expected help to alleviate its debt burden and assuage investors’ concerns about its significant debt. A.K. Prabhakar, head of research at IDBI Capital Market Services Ltd said, “There is a high chance of the shareholders approving the move of cash from general reserves to retained earnings as there is the possibility of dividend payments… Transparency has always been an issue with Vedanta but new investors like the company for its aggressiveness and dividend paying capability.”
Vedanta’s 13.875% 2024s are trading higher at 87.22, up 0.86 points to yield 26.2%.