Billionaire Anil Agarwal’s Vedanta group has planned to create a capital nearing $8 billion through a mix of debt and equity with a goal to acquire state-run Bharat Petroleum Corp Ltd (BPCL), Mint reported. London-based Vedanta Resources Plc has commenced talks with a group of banks to collect the funds.
Last month, the mining conglomerate displayed a preliminary interest in buying the government’s 53% stake in BPCL. The sale, part of India’s asset-sale programme, is undertaken with the aim to secure government capital of about ₹45,000 crore and is also intended to aid revival of the economy by making up for revenue loss caused by COVID-19 related disruptions and secure funding for additional spending to boost the economy.
Analysts, however, are currently dubious about the group’s ability to raise entire funding independently, considering its unstable balance sheets. While BPCL’s dividend payments could cover the cost of debt of any acquisition, “The question we have is how would Vedanta Ltd (an Indian unit of Vedanta Resources) secure funding, given the worries on leverage at Vedanta and the parent,” JP Morgan opined in a report in November.
Vedanta group faces a rough road ahead in fulfilling its debt obligation maturing in the coming quarters, and investors have raised concerns about the group’s ability to successfully repay bondholders. In 2020, Vedanta has secured much-needed funds by selling $1 billion of notes at one of the highest yields for a dollar bond in Asia. Strains have further elevated after its attempt to delist Indian unit Vedanta Ltd failed in October. The planned delisting would have aided easier access to cash there.
“Vedanta is aware of the challenges it faces in raising funds and is, therefore, keen to onboard equity partner(s) to jointly acquire BPCL, said a person familiar with the matter. “It has also initiated discussions with several global private equity funds to jointly bid,” the second person requesting anonymity said. The names of the PE funds could not be ascertained immediately.