November 28, 2023

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Billionaire mining tycoon in India fights to clear Vedanta’s debt

5 min read

For many years, Anil Agarwal cultivated a repute as one among India’s nice survivors. Beginning as a scrap metallic supplier, the billionaire magnate constructed a mining conglomerate to rival another, weathering money crunches, authorities friction and disputes with Indigenous individuals over enlargement plans.

However in current months, Agarwal has confronted one among his hardest acts but. The tycoon’s Vedanta Assets Ltd. has near $2 billion of bonds to settle in 2024 – half of which is due in January. Wanting that, his London-headquartered firm dangers getting reduce deeper into junk and dropping essential entry to funding. That is dangerous information for one among India’s richest males, who has lengthy dreamed of competing in opposition to Glencore Plc and BHP Billiton because the world’s dominant pure sources provider.

The corporate’s bonds are rated close to the bottom rung of gradings, elevating the stakes for one among India’s largest miners to discover a approach out of the abyss. Buyers are involved about Vedanta’s potential to faucet funds from its subsidiaries. A number of dividends over the previous yr have depleted money reserves, a troubling improvement amid excessive international rates of interest and risky commodity costs.

Who’s Anil Agarwal?

Added to the combo of unknowns is the person himself. Whether or not Agarwal’s brash model of deal-making is a threat or a bonus will depend on whom you ask.

“Anil has all the time been a survivor,” stated Tom Albanese, who served as chief government of Vedanta Assets from 2014 to 2017. “He rose actually from the road; English is not his first language. He all the time felt he had one thing to show.”

Vedanta Assets and Vedanta Ltd. did not reply to messages searching for remark.

The power of Agarwal’s political connections may determine his destiny. A core technique to remain afloat includes offloading about $3 billion of belongings to Hindustan Zinc Ltd., a subsidiary of Vedanta that is partially owned by the Indian authorities. Officers have threatened authorized motion if the transaction goes by way of. New Delhi is apprehensive that Agarwal’s zinc deal might impression valuations for the federal government’s personal plan to promote its stake to bolster public funds.

“One straightforward approach to elevate money has failed,” stated Sunny Jiang, a fund supervisor at Haitong Worldwide Asset Administration Ltd. “It seems like this time the corporate misjudged the federal government’s perspective.”

How Agarwal manages this second may ripple by way of his portfolio. His holding firm Volcan Investments Ltd. not too long ago tied up with Taiwan’s Hon Hai Precision Trade Co. to construct a $19 billion semiconductor manufacturing unit.

The standard roots of Agarwal

Agarwal hails from humble roots. Raised within the Indian state of Bihar, he took over his father’s enterprise making aluminum conductors within the Nineteen Seventies, after which ventured into buying and selling scrap metallic.

Agarwal hails from humble roots. Raised within the Indian state of Bihar, he took over his father’s enterprise making aluminum conductors within the Nineteen Seventies, after which ventured into buying and selling scrap metallic.

Vedanta was solid by way of a collection of aggressive acquisitions. In 2001, Agarwal sought a majority stake within the government-owned Bharat Aluminum Co. His bid of 5.5 billion rupees was so massive on the time that many questioned the corporate’s potential to fund the acquisition.

However Agarwal’s public relations prowess helped him steer the narrative. He flaunted the acquisition of India’s greatest firm throughout a media blitz and sought funds from banks by issuing a young.

“All banks wished to provide us cash,” he recalled in an interview with native media in 2016.

Inside a number of years, Agarwal expanded his empire considerably. He acquired Hindustan Zinc in 2002, after which positioned profitable bids for iron ore producers Sesa Goa Ltd. and Cairn India, regardless of having no oil and gasoline expertise.

At a media occasion this month in New Delhi, Agarwal insisted that Vedanta is well-placed to settle its debt. “I’ve not defaulted anyone’s cash,” he stated onstage. “So long as there isn’t any difficulty in governance, one can proceed to develop.”

Rise of Vedanta

In 2003, Vedanta turned the primary Indian enterprise to record in London earlier than Agarwal took it non-public 15 years later. The corporate is now one of many largest pure sources suppliers on this planet, with mining operations in India and Africa, and core strengths in zinc, lead and aluminum.

Agarwal’s supporters stated the billionaire has excelled by creating rapport with banks and diversifying his companies. He’s typically described as a “compulsive entrepreneur” who runs his corporations with a hands-on strategy and has little tolerance for inefficiency or laziness.

“The longer I labored with him, the extra I spotted how sensible he was,” stated Albanese, the previous chief government of Vedanta Assets. “He would not all the time give the impression of being the neatest man within the room “- however he’s.”

Agarwal’s portfolio

Hindustan Zinc is a key piece of Agarwal’s portfolio. In 2017, after rival miner Anglo American Plc rebuffed a proposed merger, Agarwal acquired the biggest stake within the firm, together with by way of taking loans from a unit of Vedanta. Two years later, Agarwal bought the stake, holding the worldwide mining trade guessing about his motives – and whether or not the acquisition was extra about him than the rest.

Whether or not Agarwal can steer Vedanta by way of the most recent tumult stays in query. S&P International Scores raised an alarm in February over Vedanta’s potential to repay future maturities and Moody’s Buyers Service reduce the corporate’s debt deeper into junk this month.

Accessing capital markets is hard due to excessive international rates of interest and a decline in Vedanta’s bond worth. Three out of six greenback notes of the agency are buying and selling under 70 cents, a stage that is typically thought of distressed.

Even with these challenges, Vedanta stated in a February 28 submitting that it was “totally assured” of assembly upcoming maturities for the quarter ending in June. The corporate has tried to calm buyers after a stoop within the share value of its Indian entity – which coincided with the federal government’s warning over the Hindustan Zinc deal.

Among the many choices being thought of to lift money is divesting a lower than 5% stake in Vedanta Ltd., based on individuals accustomed to the developments, who requested to not be recognized as a result of the data is non-public. A stake sale will solely be thought of if different fundraising choices fail, the individuals stated.

Agarwal is more and more counting on dividends from Vedanta Ltd. and Hindustan Zinc to pare his holding firm’s debt, which totals round $7.7 billion. The Indian unit has paid 4 dividends within the present monetary yr ending in March, with whole disbursements of about 301 billion rupees ($3.6 billion). An unprecedented fifth dividend is deliberate for Tuesday.

Lakshmanan R, a senior credit score analyst at CreditSights, expressed confidence that Agarwal will reside to see one other day.

Agarwal has teetered getting ready to defaulting earlier than, he stated, “however he has all the time come out unscathed.”

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