Vedanta Group is formulating a strategic plan worth ₹30,000 crores aimed at reducing its debt and accelerating growth.
Introduction
Under the leadership of Anil Agarwal, Vedanta Limited is taking significant steps to streamline its operations and finance. The company is devising a special financial plan that involves Qualified Institutional Placement (QIP), Offer for Sale (OFS), and dividend distributions, all aimed at generating approximately ₹30,000 crores. This initiative is not just about raising funds; it represents a broader strategy to stabilize and enhance the company’s financial standing.
Details of the Financial Plan
The funding structure of this plan will be multifaceted. It includes:
- QIP: ₹8,500 crores from Vedanta Limited
- OFS: ₹3,200 crores from Hindustan Zinc (HZL)
- Interim dividends contributing ₹5,100 crores
- Current cash reserves of ₹13,000 crores
As a result, the estimated total fund of ₹30,000 crores is set to enhance the group’s operational framework significantly.
Utilization of Funds
A financial analyst noted that Vedanta may utilize these funds to accelerate the improvement of its balance sheet, enhance its capital structure, and fuel developmental projects. This financial maneuvering could pave the way toward achieving its short-term EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) goal of $10 billion, allowing the company to seize expansion opportunities more effectively. Furthermore, Vedanta has consistently reported robust quarterly results, with a 54% year-on-year increase in net profit for the first quarter of the current fiscal year, reaching ₹5,095 crores.
Cost Reduction Initiatives
The company has achieved its highest-ever alumina production at its Lanjigarh plant while also increasing zinc production in India. Due to structural improvements and strategic initiatives, Vedanta has successfully reduced overall production costs by 20%. As of June 2024, the mining giant’s debt stood at ₹61,300 crores. The upcoming private placements of non-convertible debentures and the sale of promoter stakes are anticipated to contribute to further debt reduction at the group level in the near term.
Future Plans
According to insider sources, the combination of strategic stake sales, reduced debt levels, and optimized operational efficiency indicates that Vedanta is on the right path toward generating free cash flow. Additionally, the proposed division of business into separate entities and transformative projects are expected to support the company in maintaining these positive trends. Ongoing investments will likely enhance product volumes, integration, and the range of value-added products offered by the company.
Stock Performance
On Monday, shares of both listed entities under the Vedanta Group witnessed an uptick. Vedanta Limited’s shares rose by 3%, closing at ₹463. During the trading day, the stock peaked at ₹465.95, while it opened at ₹452.35. Meanwhile, Hindustan Zinc’s shares also showed gains, with a 2.78% increase reaching ₹528.20, after hitting a high of ₹528.80 and opening at ₹517.35 during the trading session.
Conclusion
Vedanta Group’s comprehensive strategy to reduce debt and fuel growth, combined with favorable market responses, signals a proactive approach to ensure financial sustainability and operational efficiency. As the company moves forward with its plans, stakeholders remain optimistic about the potential for increased profitability and market competitiveness.
