Vedanta Establishes New Subsidiary, Sesa Iron & Steel, in Goa

In a recent regulatory filing, Vedanta Ltd announced the establishment of a new subsidiary named Sesa Iron and Steel Limited in the state of Goa. This subsidiary has been created to manage the iron and steel business and facilitate growth projects and expansion of operations.

Sesa Goa Iron Ore, a subsidiary of the Vedanta Group, is located in the Western state of Goa and is actively involved in the exploration, mining, and processing of iron ore. Iron ore plays a crucial role as a primary raw material in the manufacturing of iron and steel. It's worth noting that mining activities in the state had been halted following a Supreme Court ruling in 2018.

Vedanta Resources Reclaims Control of Konkola Copper Mines in Zambia

This development comes just a day after Vedanta Resources, the parent company of Vedanta Ltd, announced that it had regained ownership and operational control of Konkola Copper Mines (KCM) in Zambia. This decision followed a dispute between Vedanta Resources and the Zambian government, which was resolved after Vedanta committed to investing over $1 billion in the mines.

KCM possesses substantial resources and reserves, with a copper grade significantly higher than the global average, making it a valuable asset in Vedanta's portfolio. Copper is considered a crucial mineral for future technologies and plays a pivotal role in addressing the energy transition needs of a decarbonizing world.

Paul Kabuswe, Minister of Mines and Minerals Development, stated, "Vedanta will return to run and resuscitate the operations of KCM as the majority shareholders." Vedanta now holds a 79.4% stake in KCM, positioning itself as a key player in the global copper production landscape.

Vedanta's Financial Challenges and Refinancing Plans

Amid these strategic developments, Vedanta Resources is actively seeking financial stability. The parent company of Vedanta Ltd is in need of substantial funds, with a requirement of ₹1.3 billion in FY24 and $4.3 billion in FY25. The company aims to refinance its $3.8 billion worth of bonds maturing between 2024 and 2026 with loans of extended maturities and manageable size.

To address its debt maturities, Vedanta Resources is planning to meet bondholders in Singapore and Hong Kong to explore financing options. The company faces the repayment of approximately $2 billion in bonds next year, and some of its bonds are currently trading at levels indicative of financial distress. Vedanta Resources acknowledges the challenging financing conditions and is focused on establishing a refinancing package that includes deleveraging, extending maturities, and managing debt size effectively.

Market Response and Outlook

In response to the positive news of regaining control of KCM, Vedanta's shares showed a modest increase. The stock opened at ₹245.05 and climbed over 2% to reach a high of ₹246.55 from the previous close of ₹241.4 on the NSE. Vedanta shares ultimately closed at Rs 241.45 apiece on NSE.

The performance of Vedanta shares over the past 12 months, as of September 6, 2023, shows a decline of approximately 10%, which is in contrast to the 11% increase seen in the benchmark Nifty index.

The legal details of the agreement for KCM's reinstatement and the reworking of the shareholders' agreement will be finalized within the next three months. Vedanta's renewed focus on its core businesses, including iron, steel, and copper, positions the company strategically to meet the growing demands in India and worldwide for these essential resources.