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Sep 30 – On Friday, Vedanta also managed to break a seven-day losing streak, during which it had plummeted to its lowest point in 31 months.
What’s noteworthy is that Vedanta’s gains on Friday were accompanied by trading volumes that were three times higher than their 20-day average.
This surge followed an announcement from its subsidiary, Hindustan Zinc, which stated that it had authorized a committee of directors to explore potential corporate restructuring measures aimed at unlocking shareholder value. For more in-depth information on this development, you can refer to the detailed story here.
Vedanta Ltd. holds a substantial 64.92 percent stake in Hindustan Zinc, a significant portion of which has been pledged.
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However, despite this recent upturn, it’s important to note that the stock ended the quarter with a 20 percent decline and a 4 percent drop for the month of September. Moreover, it has faced declines for five consecutive months, a pattern not seen since 2015.
The shares of this mining conglomerate led by Anil Agarwal had earlier hit a 31-month low earlier in the week, triggered by Moody’s Investors Service’s downgrade of certain bonds issued by its parent company, Vedanta Resources Ltd., and its wholly-owned subsidiaries. This downgrade was attributed to heightened concerns about debt restructuring in the coming months.
Additionally, Bloomberg reported earlier in the day that the parent company is considering a restructuring of payments on dollar bonds maturing in the next two years, following discussions with international investors. The report also indicated a plan to repay a portion of these bonds due in 2024 and 2025 in cash, with the remaining principal deferred for three years.
Reports on Thursday had also suggested that Vedanta is nearing a deal to demerge its businesses into several listed entities. If this broad restructuring plan proves successful, it may assist Agarwal in managing his group’s substantial debt burden.
It’s worth mentioning that Vedanta’s share price has been on the rise in line with the overall surge observed in other metal companies, owing to the decline in the US Dollar index on Friday.
Looking ahead, Vedanta’s parent company faces a significant challenge in repaying notes worth nearly $2 billion in the financial year 2025. When considering these bonds, the company is confronted with a debt repayment totaling $3.6 billion in the upcoming financial year, as reported by Kotak Institutional Equities.
Prakash Diwan, a market expert, commented, “The stock has not been very consistent. So, not for the fainthearted and it is best to take tactical play there, not something very long-term. If you have it and you are not getting value, you will have to definitely wait for a simple reason that if there is a possibility of improvement, it is on the way up because they will want to do things which create value so that the parent company, Vedanta Resources, has to get bailed out. So that will not happen if this business suffers. So, I am sure there is some linearity to improvement that can happen, and people would start seeing some value getting created in the near-term as well.”
In summary, Vedanta’s stock ended the day with a 7 percent decrease, closing at Rs 222.7.
