Vedanta Shares Plummet 9% Ahead of $2-Billion Fundraising; Why Stock Price is Falling?

Vedanta share price stayed in the red for eight consecutive trading sessions, with a decline of nearly 9 per cent on February 28 in anticipation of its $2-billion fundraising scheduled to begin in the coming weeks.

The stock was trading at its lowest level since October 3, 2022. Thus far in the month of February, it has dipped 21 per cent from level of Rs 332.60. In comparison, the S&P BSE Sensex up 0.08 per cent at 59,337 at 10:38 am. Average trading volumes on the counter jumped 1.7 times, with a combined 17.06 million shares having changed hands on the NSE and BSE till the time of writing of this report.

According to stock market experts, Vedanta shares are under sell off pressure due to negative sentiments after the road block in its acquisition of state-owned Hindustan Zinc and sharp rise in US dollar that led to depreciation of Vedanta bond yield to ‘junk’ levels.

S&P Global Ratings stated in a report that if Vedanta Resources, led by mining billionaire Anil Agarwal, is unable to advance either the $2 billion fundraising exercise or the sale of its international zinc assets to Hindustan Zinc Ltd in the near future, the company’s credit rating will face immediate strain.

According to reports, the government is not in favour of Vedanta Resources’ plan to sell its global zinc assets to HZL, its Indian subsidiary, for almost $3 billion. The government has raised various concerns, including the valuation of the assets, as it owns a 29.54 percent stake in HZL, which was privatised over 20 years ago.

After Vedanta Ltd declared a dividend in January, S&P reported that Vedanta Resources is fully funded until March 2023. However, the company has debt maturities of only $15 million between July and September, which means it will need to raise a minimum of approximately $500 million to meet its obligations until June.

At the end of the third quarter of FY23, Vedanta Ltd net debt increased by Rs 6000 crore due to the company’s sustained capital expenditures and dividend payouts. However, in the first nine months of FY23, Vedanta Ltd reduced its debt at the holding company Vedanta Resources Limited (VRL) by $1.7 billion, which is in line with its commitment to reduce debt by $4 billion over three years.

“The global macro environment is likely to weigh on any significant improvement in LME prices. The China opening is expected to support demand and prices, but fears of recession in Europe continue to raise concerns,” analysts at Motilal Oswal Financial Services said in a Q3 result update.

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