Vedanta’s dividend payouts to parent concern lenders

livemint.com:

MUMBAI, NEW DELHI : Banks have turned cautious on their exposures to Vedanta Ltd, worried that sizeable dividend payouts to ease the parent’s debt burden might stress the balance sheet of the domestic entity to which they have loaned money, said two bankers close to the matter. Bankers said a clutch of lenders have been discussing their stand on Vedanta and are uncomfortable with high dividends to help its London-based parent Vedanta Resources deleverage. They said they are closely watching their exposures but added that the company has been repaying loans on time.

“The perception of the company is not that great at the moment. Many of us are unwilling to take on fresh exposure to the company. While there is no repayment stress at the moment, we are worried because most of us have exposure to the Indian subsidiary," one of the two bankers cited above said, requesting anonymity.

Vedanta Resources Plc owns a 68.1% stake in Vedanta Ltd, which, in turn, owns 64.92% in Hindustan Zinc Ltd. The government owns a 29.54% stake in Hindustan Zinc. In FY23, Vedanta declared dividends of ₹37,730 crore, compared to ₹16,728 crore in the previous fiscal year.

Additionally, its subsidiary, Hindustan Zinc, declared a dividend of ₹32,000 crore in FY23. On 28 March, Crisil Ratings revised its outlook on Vedanta to negative from stable, citing “higher-than-expected financial leverage and lower financial flexibility with reducing the ratio of cash surplus to one-year maturities for fiscals 2023 and 2024". This, it said, was owing to increased cash outflow from Vedanta through dividends towards large maturing debt obligations at parent company Vedanta Resources.