“We have generally focussed on Vedanta Ltd’s cash flows and earnings excluding Hindustan Zinc to unravel the key drivers of the credit. VDL (ex-HZL) reported EBITDA of $3.1bn in FY25 and a net leverage of 2.2x. We struggle to see financial stress at VDL with these metrics. For HZL, net leverage was 0.1x. HZL has capex plans and we see net leverage going up to 0.5x,” the JP Morgan note said.

The JP Morgan report added that it considered Vedanta to be cheap within Asia and within the emerging markets’ metals and mining space with healthy EBITDA generation (~ $5bn run-rate), improving funding access with approximately $1bn bank loans raised by Vedanta Resources in FY26, and attractive yields (~8-10%).

Earlier this week, US short seller Viceroy Research alleged that Vedanta Resources is “systematically draining” Vedanta Ltd and Hindustan Zinc via dividend payouts, a charge which the group called as “selective misinformation and baseless” aimed at discrediting it.

On HZL, JP Morgan’s note said that the Indian government has retained and maintained three board seats at HZL since its divestment in the early 2000s. Further, there have bene instances when the government-nominated directors acted to prevent transactions that they consider will not be beneficial to HZL or its stakeholders. The government currently owns 27.92% stake in HZL while Vedanta Ltd owns 61.84%.

“We believe the GoI (government of India) retains oversight of major decisions, including capex plans,” the note added.

Talking about specific instances in the Viceroy note where HZL has not reported tax and other claims under litigation as liabilities, the JP Morgan note said that such claims and the related litigation are common in heavily regulated sectors like mining.

“HZL has reported tax and other claims of ~Rs 151.5 billion, which are under litigation. These are not recognized by the company as liabilities. JSW Steel too has reported Rs 150 billion of such claims under litigation. Neither company shows the amount as a liability on the balance sheet,” the note said.

On HZL’s call/put option, the report said that these options could be exercised within 90 days of the government becoming aware of a default on a particular condition related to the completion of a smelter plant in a specific location.

“The project was to be completed by 2007, but HZL completed the smelter at a different location after informing the government. We would be surprised if any breach had not been identified by the government over the past ~20 years,” it said.

Announcing the appointment, Anil Agarwal, Chairman, Vedanta Group said, “Deshnee joins us at an exciting phase in our journey. After an amazing 25 years in which we have emerged as India’s champion in the resources sector, we are now embarking on a new phase of growth which will make us a $100 billion critical minerals, energy and technology company, serving India and the world. At Vedanta, we always do business with a purpose. Deshnee’s growth mindset along with her commitment to sustainability aligns perfectly with our core values.”

Vedanta Resources is undergoing a fast-paced transformation, positioning itself as a key driver of growth in India and globally. Guided by its “Transformational Blueprint,” the company is focused on sustainable expansion, advancing green energy, circular economy initiatives, and digital transformation to redefine the resource sector. Its Indian subsidiary, Vedanta Ltd, is demerging its businesses to unlock significant value for stakeholders, with the acquisition of key mineral blocks to strengthen its portfolio. The appointment of Deshnee Naidoo as CEO marks a pivotal step in this journey, with her proven track-record in sustainability and operational excellence poised to deliver the business full potential value.

Speaking on her appointment, Deshnee Naidoo said, “This is homecoming for me, and I look forward to an exciting growth phase at Vedanta, enabled by the demerger. Guided by the Chairman, Mr. Anil Agarwal’s vision, we will work to make Vedanta a leading global conglomerate in critical minerals, renewable energy and emerging technologies.”

Bengaluru, January 16, 2025 – Vedanta Resources has raised $1.1 billion through a new dual tranche issuance in international debt capital markets, the company said in a Singapore exchange filing.

As per the exchange filing, the bond issuance consists of two tranches – a $550mn tranche of 5.5 years tenor at 9.475% interest rate and a $550mn tranche of 8.25 years tenor at 9.850% interest rate. Both tranches garnered strong investor demand with the bonds receiving final orders of $3.4 bn from over 135 accounts, representing an oversubscription of 3.1x, the company said. The net proceeds will be used to prepay VRL’s outstanding bonds and pay any related transaction costs.

The final bonds allocation included 61% from Asia, 30% from EMEA, and 9% from US for the 5.5-Year Tranche and 54% from Asia, 30% from EMEA, and 16% from US for the 8.25-Year Tranche.

Ajay Goel, Chief Financial Officer said “The latest transaction marks the complete refinancing of Vedanta’s restructured bonds. The strong interest in the series of transactions reflects significant investor confidence in the several strategic steps that Vedanta has taken over the last several quarters in terms of delivering record production, cost rationalization and deleveraging.”

VRL has refinanced $3.1bn in US dollar bonds since September 2024 through four successive international bond transactions.  The total quantum of USD bonds raised by Vedanta marks the largest amount raised by an Indian issuer since 2022. The issuance marks an important step for VRL which has reduced it’s debt by $4.6 billion over the past 3 years, bringing it to its lowest level in a decade.

Two major agencies, Moody’s and S&P Global upgraded VRL’s and its instruments’ ratings citing recent developments. On January 13, Moody’s said it had upgraded VRL’s corporate family rating to B1 from B2 and that on the senior unsecured bonds guaranteed by VRL to B2 from B3, a one notch upgrade, while maintaining a stable outlook. Moody’s has assigned a B2 rating to VRL’s proposed senior unsecured bond issuance.

S&P Global too assigned a preliminary rating of ‘B’ on VRL’s senior unsecured notes on January 13. This is one notch upgrade from the current one. It has placed the rating on credit watch positive.

The company is looking to upsize the deal and is in advance discussions with other banks for additional loans of $200 million, it said. Rating agencies S&P Global and Moody’s upgraded Vedanta Resources last year. The London-based company has been shoring up its finances.

In September 2024, Vedanta Resources raised $900 million in its first dollar bond issue in more than two years and later raised $800 million through another dollar bond issue in November to refinance some outstanding debt. “The loan arrangement enhances the group’s liquidity position,” Vedanta Resources said.