Vedanta shares plunge over 7% in intraday trade. Here's why

By India Today Business DeskShares of Vedenta Limited have been under pressure for eight consecutive sessions and fell sharply on Tuesday. Vedanta’s stock declined as much as 9 per cent in early trade, but recovered marginally at around 11:40 am to trade 7.17 per cent lower to trade at Rs 267.55 a piece.

In the past five sessions, Vedanta’s stock price has declined over 12 per cent, while it has fallen nearly 20 per cent in a month.

The decline in Vedanta’s share price comes weeks before its scheduled $2-billion fundraising drive. Shares of the company have been falling after the Centre opposed London-based Vedanta Resources Limited’s bid to sell international zinc assets to Hindustan Zinc.

This has also affected the prices of Vedanta Resources’ dollar bonds. The bond yield has depreciated more than 30 per cent, putting Vedanta bonds in the junk category. This puts the company in a precarious position and it could face a debt repayment crisis due to the fall in its bond yield in the global markets.

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An earlier report by Business Today Television indicated that the Centre was upset with Vedanta’s proposal as the move could hinder and distort its plan to dispose of its 29.54 per cent residual stake in Hindustan Zinc. It may be noted that Hindustan Zinc also fell over 4 per cent in early trade.

Last week, the Centre had opposed Vedanta’s proposal to sell its international zinc assets to its subsidiary Hindustan Zinc due to concerns over valuation. Vedanta held 65.92 per cent stake in Hindustan Zinc as of December 31, 2022.

The Centre, which is a minority shareholder in Hindustan Zinc, has warned of legal action and urged the company to explore other cashless methods for the acquisition of assets.

Also Read | Govt opposes Hindustan Zinc’s proposed deal for Vedanta zinc assets

The sale of assets to Hindustan Zinc is important for parent company Vedanta, which is looking to reduce its net debt. Vedanta has to pay $1.2 billion due by the second half of 2022-23, $4.1 billion by FY24, $3.9 billion by FY25 and $4.7 billion by FY26.

Meanwhile, ratings agency S&P Global stated in a report that if Vedanta Resources Limited 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 be negatively impacted.

Another worry for the company stems from the amount of pledged shares. It is worth noting that 99.99 per cent of the promoter holding was pledged as of December 31, 2022. In addition, over 87 per cent of promoter holdings in Hindustan Zinc were pledged at the end of December.