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Vedanta Resources is expected to service its debt maturities in 2024 thanks to the recent $1.3bn fundraising and other cashflow sources like dividends, stake pledging and local private bond placements, as per CreditSights. While remaining cautious and watchful over Vedanta’s refinancing risk, credit research company CreditSights maintained a ‘Buy’ recommendation on Vedanta’s dollar bonds. It expects Vedanta to rely heavily on external fundraising of about $2.1bn and an additional $950mn to plug the funding gap. However, they also noted that Vedanta’s credit metrics could deteriorate mildly in FY2024 due to developments in China and slowing commodity prices. CreditSights expects Vedanta’s dollar bonds to rally by 10-15bp across the curve if its refinancing activities turn out to be successful. If it fails, there could be a sharp sell-off in bond prices to around 50 cents to the dollar.
Vedanta’s 13.875% bonds due January 2024 are currently trading at 92.53 while its 6.125% bonds due August 2024 are at 74.5.
Separately, ET reported that Hindustan Zinc paid 1.7% of its revenues as royalty to Vedanta Ltd., the Indian listed subsidiary of Vedanta Resources. Vedanta Ltd. in turn paid the proceeds to its parent holding company. Last week, reports noted that Vedanta Resources received ~$325mn in for 2022-23 as part of the brand fees that it charges its subsidiaries. Here, the Indian listed subsidiary was said to have paid a higher royalty fee of 3% against 2% to the parent.