Bengaluru, October 23, 2024: Continuing its liquidity management exercise, Vedanta Resources Finance II PLC (VRF) said in a Singapore exchange filing that it has exercised a tap option on its September $900MN bond issuance, raising a further $300MN at a yield of 9.99%. A tap issue is a procedure that allows companies to issue bonds or other short-term debt instruments from past issues.
The new issuance received final orders of over US$500 million, a 1.7X oversubscription from existing and new investors. 67% of the allottees were from the Asia Pacific (APAC) region, 26% from Europe and the Middle East, and 7% from the Offshore United States. The bonds are rated “CCC+” by S&P Global Ratings, and the net proceeds from the tap option will be used to partially prepay Vedanta’s US$608 million 13.875% bonds due 2028.
“We are thrilled by the tremendous response to Vedanta’s tap offering, soon after the issuance of our US$900 million Bonds in September 2024. This underscores the huge confidence of the global investor community in Vedanta’s robust business performance and our commitment towards attaining a balanced capital structure through deleveraging our balance sheet. We are confident of continuing to deliver substantial value for our global and domestic investors in the years ahead,” said Chief Financial Officer, Vedanta.
In September, Vedanta Resources raised USD 900 million in its first dollar bond issue in more than two years to prepay existing bonds. The USD 900 million raise was at a coupon rate of 10.875 percent in a five-year US dollar-denominated bond. It received subscriptions from over a hundred investors, including those from the USA, Europe, and the Middle East.
Recent moves by the Vedanta Group entities to deleverage its balance sheet have received a positive response from investors, with the bonds witnessing a rise in investor interest. Two bonds issued by the Group entities touched 52-week highs on a trailing twelve-month basis, while its recently issued 10.875% bond trades above par. The highest rally is in the 9.25% April-26 bond, which has rallied nearly ~61% in CY24.
The rally is based on three factors. First, VRL continues to generate steady income from brand fees and dividends from its Indian subsidiary. Secondly, the inclusion of India’s sovereign bonds in major global indices like FTSE Russell in October and JP Morgan Government Bond Index-Emerging Markets in June spurred the interest of global investors, leading to a spate of issuances by Indian companies.
| # | Issuer | Bond, Coupon & Maturity Date | Price Dec. 31, 2023 ($) | Price on October 21 ($) | YTD Gains |
| 1 | VRF II PLC | 10.875%, due September 2029 | – | 103.06 | – |
| 2 | VRL | 13.875%, due December 2028 | 67.47 | 102.16 | 51.41% |
| 3 | VRF II PLC | 13.875%, due December 2028 | 75.12 | 100.89 | 34.30% |
| 4 | VRL | 9.25% due April 2026 | 61.53 | 99.34 | 61.45% |
VRF II PLC: Vedanta Resources Finance II PLC, VRL: Vedanta Resources Limited
Third, VRL has undertaken a liquidity management exercise under which its group company, VRF, repays bonds with a higher interest rate to save on interest costs. The buoyant sentiment in VRL bonds also arises from the strong performance of its subsidiary, Vedanta Ltd, whose stock has rallied nearly 80% year to date.
