Vedanta's Strategic Loan Maneuver: Deleveraging and Refinancing Excellence

Vedanta Ltd effectively repaid a USD 900 million high-cost loan through a strategic mix of QIP proceeds and a new lower-interest facility, leading to net deleveraging of USD 550 million. This move aligns with its broader strategy to improve financial health, reducing debt efficiently and gaining positive rating agency responses.

Vedanta Ltd has successfully repaid a substantial USD 900 million loan by utilizing proceeds from a Qualified Institutional Placement (QIP) and acquiring a new lower-interest USD 350 million facility. This strategy has led to a net deleveraging of USD 550 million, according to sources familiar with the matter.

The original loan was secured by Vedanta's subsidiary, THL Zinc Ventures, in May 2023 at a high interest rate of 13.9 per cent. Part of this was repaid using funds from Vedanta's USD 1 billion QIP, scheduled for June 2024. Additionally, a new USD 350 million loan at 9.6 per cent interest per annum from JP Morgan and other financial institutions significantly reduced the annual interest cost by USD 90 million.

This refinancing aligns with Vedanta's strategic deleveraging goals, evident from the improvement in its net debt-to-EBITDA ratio to 1.4 times by December from 1.9 times in Q1 FY24. Parent company Vedanta Resources Ltd has also reduced its debt to the lowest level in a decade, further bolstering its financial position. Rating agencies like ICRA and CRISIL have responded positively, aiding in potentially lowering future refinancing costs.

(With inputs from agencies.)