Billionaire Anil Agarwal’s commodities group will return money raised from banks and bondholders after a plan to retire its Indian unit failed.
Vedanta Resources Ltd will pay $ 1.4 billion raised through bonds and another $ 1.1 billion in loans, with a small amount of interest, starting this week, according to people with knowledge of the matter. It comes after minority shareholders last week thwarted a plan to privatize Vedanta Ltd., putting the spotlight on their debt burden and whether they will attempt to delist again.
Once the largest shareholder in Anglo American Plc, Agarwal’s commodity ambitions may attract close scrutiny and even the ire of investors. The purchase of a $ 200 million economic stake in Anglo by a Vedanta unit caused a drop in shares and a series of downgrades amid questions about the complexity of the deal and who had voting rights. The billionaire got out of his investment last year, pocketing an estimated $ 200 million to $ 300 million after fees.
“Agarwal has been in the eye of the storm, first for corporate governance, then for the merger of unlisted Vedanta companies, so investors were really mad at him,” said Sanjiv Bhasin, director of IIFL Securities. Ltd. “The shares have immense value and the business has changed. Savvy shareholders will not sell the stock at a discount.”
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Vedanta’s delisting plan was approved in May, and some analysts at the time raised concerns about a lack of shareholder enthusiasm. When the offering closed on Friday, it fell short of the 1.34 billion public shares it needed to continue.
The company has not made a decision on whether it will propose a delisting again as it is still too early, said people familiar with who asked not to be identified because the matter is private.
Earlier this year, Vedanta suffered an impairment of 171.32 billion rupees ($ 2.3 billion) due to its oil and gas business, which reduced its book value before the planned phase-out. Shareholders should have questioned the nature and timing of the depreciation of the assets, the proxy advisory firm Institutional Investor Advisory Services India Ltd. said last week.
Dividend payment
Large shareholder Life Insurance Corporation of India indicated that it was seeking prices of up to Rs 320. Shares of Vedanta rose 2.8% after closing 20% lower on Monday, its biggest drop since 2008.
CLSA India pointed to the dividend payments as a way to help parent Vedanta Resources reduce its debt burden, one of the goals of the proposed delisting. The company has independent debt of $ 6.7 billion and, of this, a term loan of $ 1 billion to $ 1.4 billion matures in 2021-22, analysts Indrajit Agarwal and Vikash Jain wrote in a note to clients. .
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Capital allocation will dominate investor concerns rather than operating performance, and an increase in intercompany lending to the parent will be seen as negative for minority investors, they said.
The failed delisting is an “additional scar” for Vedanta, Ritesh Shah and Chintan Shah, analysts at Investec Capital Services Ltd., said in a report. Investor focus will now shift to maturity agreements on company or parent debt, dividends, and, “most importantly, management’s ability to restore minority trust rather than issues. recurring corporate governance issues “.
(With the help of Nupur Acharya.)
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