Vedanta Resources Successful Debt Restructuring Spurs Bullish Outlook

Vedanta Resources Successful Debt Restructuring Spurs Bullish Outlook

VoM News Desk | January 11, 2024 | 11:50 AM IST | Breaking News | Follow on Google News

Vedanta Resources Successful Debt Restructuring Spurs Bullish Outlook/Reuters

Vedanta Resources Successful Debt Restructuring Spurs Bullish Outlook

A recent report from Nuvama Institutional Equities applauds Vedanta Resources for its successful debt restructuring, removing a significant burden on the company. The brokerage upgrades Vedanta’s stock to a “BUY” rating and raises the target price to ₹362, an optimistic shift from ₹265.

The debt restructuring, albeit costly, positions Vedanta to focus on vital capital expenditures related to aluminium and zinc. Additionally, the sale of steel and iron ore assets is expected to generate additional cash flows over the next two years, as outlined by the brokerage.

Nuvama Institutional Equities sees further potential upside through strategies like the monetization of steel and iron ore assets and potential business splits. The brokerage views Vedanta Resources’ debt restructuring as a move that secures liquidity for the company over the next two years.

The report details Vedanta Resources’ bond restructuring, involving maturities in FY24 and FY25 totaling USD 3.15 billion. The company agreed to pay an upfront consent fee of USD 68 million, along with USD 779 million, amounting to a total of USD 847 million. This move defers maturities until FY27, providing Vedanta with essential flexibility in liquidity.

While acknowledging that consolidated net debt will remain high, the brokerage expects it to peak around FY25E. Vedanta, which has been operationally profitable, faces challenges primarily linked to its parent company’s ongoing debt, now pushed back to FY27.

The brokerage emphasizes that Vedanta has an opportunity to execute its expansion plans in zinc and aluminium, generating additional cash flows in the interim (FY25 and FY26). Furthermore, it encourages the monetization of steel and iron ore assets and business splits, presenting avenues to enhance overall value.

In conclusion, the brokerage expresses confidence in Vedanta’s positive trajectory, stating that the company is moving in the right direction, leading to the upgrade to a ‘BUY’ rating.

VoM News Desk

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