Why Vedanta Shares Are Plummeting For The Fourth Consecutive Session

Vedanta’s share price has been nosediving for the last eight sessions following negative sentiments after the company hit a roadblock in its acquisition of state-owned Hindustan Zinc.

What Happened? The government opposed Vedanta’s proposal to sell its international zinc business to Hindustan Zinc last week for a deal worth $2.98 billion (₹24,633 crore) citing valuation concerns.

The government has threatened to take legal action to stop the sale of Vedanta’s Africa-based assets to Hindustan Zinc —India’s largest zinc-lead miner in which it holds a 29.54% stake. The opposition to the deal comes as a blow to billionaire Anil Agarwal’s plans to trim down the mining giant’s $7.7 billion (₹63,652.39 crore) net debt.

Adding to the multinational mining company’s worries is the pledging of shares by promoters. 99.99% of the promoter holding was pledged as of Dec. 31, 2022. On the flip side, 87.59% of promoter holding in Hindustan Zinc was pledged at December-end.

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Prices of Vedanta Resources‘ dollar bonds have also continued to slide, following the government’s disagreement with the deal — an event that hasn’t been aided by the US Dollar’s sharp rise in levels in the foreign exchange market. So far, Vedanta’s bond yield has depreciated to the tune of more than 30% which had led Vedanta bonds to be categorised as ‘junk’.

Per Bloomberg data, London-based Vedanta Resources has dollar bonds worth $4.7 billion (₹38,853.5 crore) maturing in the next four years, with $900 million (₹7,439.5 crore) due in the first half of 2023.

Price Action: Vedanta shares were trading 6.58% lower at ₹268.45 at market close on Tuesday.

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