London-based VRL, the parent of Indian operating company Vedanta, needs $1.3 billion in FY24 and $4.3 billion in FY25.
“Low opco cash balance, large maturities in FY24-25 and high cost of funding are challenges,” said Standard Chartered Bank. “While the holdco still has a few options, an eventual extension of the USD bonds cannot be ruled out.”
In the note, the bank said gross debt reduction to $6.4 billion from $9.66 billion in just over a year was achieved through significant dividend payments from the company’s Indian operating subsidiaries and a strategic stake sale in Vedanta Ltd. Debt repayments were primarily funded through dividend payments of $3.91 billion by Hindustan Zinc (HZL) and $3.80 billion by Vedanta Ltd, apart from brand and management fee inflows of $300 million.
VRL has several avenues to tackle debt repayments. These include internal cash flows, dividends, debt raising, increased management and brand fees, inter-company loans, stake sales and asset sales. But executing many of these options could be challenging. VRL faces several hurdles, including deteriorating cash reserves at its Indian subsidiaries, substantial upcoming debt maturities, and a high cost of funding.
The company has a funding gap of $1.3 billion from July 2023 to March 2024, and a funding requirement of $4.3 billion in FY25.