Vedanta to Restructure Businesses into Listed Entities to Reduce Debt

Vedanta Ltd, Anil Agarwal”s debt-laden metals-to-energy conglomerate, is all set to restructure its businesses into multiple listed entities to reduce its debt load, according to people familiar with the matter.

The company has notified its lenders about the impending restructuring and may officially announce the developments in the coming weeks.

Vedanta plans to separately list its aluminum, oil and gas, and iron ore and steel businesses, while Vedanta Resources will remain as the holding company.

The indebted Vedanta Resources has been contemplating the corporate restructuring to allow the company to disburden its debt. However, the recent surge in global borrowing costs has made borrowing more cumbersome.

Approximately $2 billion worth of bonds are set to mature next year, adding to the urgency.

In August, Agarwal proposed a strategy to segregate some of the company”s operations, but did not disclose any specifics.

There are some hurdles as well, the potential one among them being the group”s use of its own stock to secure debt. According to stock exchange data, it has pledged virtually all of its majority holding in both companies.

“Vedanta Ltd. has limited ability to de-merge other units given creditors have charge of cash-generating assets, particularly Hindustan Zinc,” Bloomberg reported Deven Choksey, managing director of brokerage KRChoksey Shares & Securities Pvt. in Mumbai as saying.

According to the report, Vedanta”s debt continues to be a cause for concern. The company”s bonds due in August 2024 and March 2025 are currently trading below 75 cents on the dollar, which is generally regarded as a sign of financial distress. Moody”s Investors Service recently downgraded the parent company”s credit ratings further into junk territory, citing the increased likelihood of debt restructuring in the coming months.