On Friday, Vedanta’s stock prices closed at Rs 275.30, 2.29% down from the previous close, despite the strong overall market. This was due to a significant number of the company’s total equity being traded on both the NSE and the BSE, which caused a decrease in the share prices. The S&P BSE Sensex was up by 1.7% or 1,006 points at 58,966 levels.
It was reported that Vedanta’s board of directors had approved a fifth interim dividend of Rs 20.50 per equity share for 2022-23, which amounted to Rs 7,621 crore. The record date for the payment of this dividend was set to be Friday, April 7, 2023.
Over the past two months, Vedanta has been underperforming the market by falling 17% compared to the S&P BSE Sensex, which only declined less than 1%. This drop in performance could be due to several reasons, such as the company’s financial situation or other market factors.
Moreover, CRISIL Ratings has revised its rating outlook on Vedanta’s non-convertible debentures (NCDs) and long-term bank facilities from ‘Stable’ to ‘Negative’ while reaffirming the rating at ‘CRISIL AA.’ Additionally, the rating on the commercial paper and short-term bank facilities has been reaffirmed at ‘CRISIL A1+.’
The reason for the revision in outlook is due to the increased financial leverage of Vedanta and its decreasing financial flexibility. This is because Vedanta’s cash surplus has reduced compared to its one-year maturities for fiscal 2023 and 2024. The company has been paying dividends towards large maturing debt obligations at its parent company Vedanta Resources (VRL). VRL is rated ‘B-/Stable’ by S&P Global Ratings, and faces increased refinancing risk and moderating operating profitability.
VRL has annual debt maturities of approximately $3 billion in fiscal 2024 and 2025, with high near-term maturities of around $1.7 billion in the first quarter of fiscal 2024. As of the writing of this report, the company is said to be in discussion with lenders to refinance upcoming maturities by the end of March 2023 or early April 2023.
However, progress on the refinancing plans has been slower than expected, which resulted in Vedanta increasing dividend payouts and reduced cash and cash equivalents during the fiscal year. This includes the recent dividend announced by Vedanta’s subsidiary, Hindustan Zinc Ltd (HZL), which has a rating of ‘CRISIL AAA/Stable/CRISIL A1+.’
Vedanta’s dividend payout for the fiscal year 2023 is expected to exceed Rs 40,000 crore, the highest ever, including the dividend payout by HZL to its minority shareholders. This could result in a cash balance being less than Rs 20,000 crore for March 2023, compared to more than Rs 30,000 crore in March 2022. In case of any further delay in the expected refinancing plan, Vedanta’s dependence on dividend payouts will increase, which could impact its ratings.