Vedanta gets clearance from 75% secured lenders for demerger

In a key step for its proposed demerger, Vedanta has received approval from 75% of its secured creditors to obtain a clearance from stock exchanges. The natural resources major will then file the demerger scheme with the National Company Law Tribunal. The company is also in talks with some of these lenders to prepay their loans.

In May this year, the company had approvals pending from some key lenders including State Bank of India and Canara Bank. This was followed by approval from SBI in June, while the remaining lenders were also expected to give their approvals in a few weeks.

Apart from SBI and Canara Bank, lenders to the company include Union Bank of India, ICICI Bank, HDFC Bank, Axis Bank and Bank of Baroda, Bank of Maharashtra, Indian Overseas Bank, Punjab National Bank and Bank of Maharashtra.

Of these, Bank of Baroda, Indian Overseas Bank, Punjab National Bank, Bank of Maharashtra and Union Bank of India have given their approvals, a source aware of the development said. Majority of the approvals have come from state-owned banks only, the source said.

These six public sector banks have collectively lent more than Rs 26,000 crore to Vedanta, data from rating agencies showed.Vedanta had a net debt of ₹56,338 crore at a consolidated level and a net-debt to operating profit ratio of 1.5 times as on March-end. Its gross debt was ₹71,759 crore, of which 82% in Indian rupees, and the rest in foreign currency. The company has term debt of ₹69,062 crore, a working capital loan of ₹1,159 crore and short-term borrowings of ₹1,538 crore.The natural resources major had announced this demerger in September last year, and intends to form six companies, each of which will house its different businesses – aluminium, power, oil and gas, base metals and steel.“Demerger of our businesses will lead to the creation of 6 strong companies, each a Vedanta in its own right. This will unlock massive value,” chairman Anil Agarwal said at the company’s annual general meeting earlier this month. “Each demerged entity will chart their own course but will follow Vedanta’s core values, its enterprising spirit and global leadership,” he said.

Agarwal has reiterated that the demerger is on track to be completed by December.

Earlier this month, the company raised Rs 8,500 crore through its first ever Qualified Institutional Placement, allocating shares at Rs 440 a piece. On Tuesday, shares of Vedanta closed at Rs 447.20 on the NSE, down 0.4% from the previous close.

Vedanta is in talks to prepay a loan of Rs 7,000 crore which it had borrowed from Union Bank of India through the proceeds of the QIP offering. The loan was due next year and had some covenants.

“The proceeds from the QIP will be used to continue to de-leverage Vedanta Limited balance sheet and to help deliver the Company’s $10 billion EBITDA targets in the near term,” the company said in a statement.