Vedanta pledges Hindustan Zinc stake to raise ₹10,000 crore2 min read . Updated: 30 Aug 2020, 10:23 PM IST
- The firm has created an encumbrance on its entire shareholding of 64.92%
- The mortgage is via the share pledge and non-disposal under-taking in favour of SBICap Trustee Co.
MUMBAI : MUMBAI: Metals and mining conglomerate Vedanta Ltd has pledged part of its shareholding in subsidiary Hindustan Zinc Ltd (HZL) to raise a ₹10,000 crore long-term loan that will refinance its short-term debt.
An exchange filing on Monday showed that Vedanta, the majority owner of the company with 64.92% stake, has pledged 14.82% of its stake (626 million shares) and created a non-disposal undertaking on the remaining 50.1% stake (2.1 billion shares) in favour of SBICap Trustee Co. Ltd.
Vedanta said it has tied up a long-term syndicated loan facility for ₹10,000 with State Bank of India as facility agent and SBICap Trustee as the security trustee with door-to-door maturity of seven years. State Bank of India has given a commitment of ₹5,000 crore as a lender. The facility will increase company’s average debt maturity profile and improve liquidity ratios as near term maturities are replaced by long term loan, Vedanta said.
This comes at a time when Vedanta Ltd is in the midst of delisting from stock exchanges.
The covid-19 pandemic and the resulting economic slump that sent stock prices plummeting has brought on a wave of voluntary delisting proposals as promoters try to buy back shares cheap. In the last three months, majority owners of Adani Power and Hexaware Technologies have also proposed buying out all publicly-traded shares of their companies, while delisting rumours have swirled around Diageo’s United Spirits, the Indian arm of US-based IT firm Oracle.
On 12 May, Vedanta Ltd had announced its holding company’s intention to delist the Indian business. The holding company, Vedanta Resources Ltd, has proposed to acquire fully paid-up equity shares of the company that are held by public shareholders at an indicative offer price of ₹87.5 per share.
The proposed delisting is part of billionaire and Vedanta Resources founder and chairman Anil Agarwal’s plan to simplify his investments across a multi-tiered corporate structure. On 20 August, Vedanta Resources said it raised $1.75 billion through bridge loans and another $1.4 billion through the sale of bonds earlier in the month.
Agarwal has a track record of merging and delisting companies. In 2012, he merged mining firms Sterlite and Sesa Goa Iron Ore to form Vedanta. After buying out Cairn, Vedanta set in motion the delisting of the cash-rich Cairn India in 2016, and merging it with itself. In 2018, Vedanta Resources was also delisted from the London Stock Exchange.
The company said the delisting of Vedanta from the BSE and the NSE will simplify its corporate structure and give it more financial and operational flexibility. Earlier this year, Vedanta was looking for an energy partner to sell a minority stake in Cairn India, but the plans were shelved after the crash in global crude oil prices in the aftermath of the coronavirus outbreak brought down Cairn’s valuations of its oil blocks.
In FY20, Vedanta Ltd reported a net loss of ₹4,743 crore, compared to the net profit of ₹9,698 crore that it reported in the previous fiscal. The company took a massive write-off of ₹17,132 crore on impairment of assets in oil and gas, copper, and iron ore businesses in the fourth quarter because of a commodity market slump due to the covid-19 pandemic.