Vedanta's announcement about a semiconductor plant in Gujarat with Foxconn last year, triggered hope for homegrown microchips in India along with a controversy. But months later reports emerged that its Chairman Anil Agarwal was finding it hard to raise funds, with concerns about its massive debt. As India Inc's bigwig Gautam Adani struggles to downplay concerns about borrowings, Agarwal has also cut debt by $2 billion to reassure investors.
The reduction was part of a plan to slash debt by $4 billion in three years, while the firm has a $7.7 billion debt causing leverage. The failure to raise $2 billion and sell zinc assets, could've hit Vedanta's credit score, at a time when firms rated lower find it hard to borrow funds at rising interest rates.
But the firm needs to raise more money, as external cash is essential ahead of its debt maturity in September. The current reduction in debt pressure has been welcomed by the market, as Vedanta's dollar bonds have gained value.
The firm plans to meet 50 per cent of the cashflow requirement for the coming year internally, and the other half via refinancing. For expansion, Vedanta has bet big on its associated firms investing in semiconductors, display glass and optical fiber, among other smartphone components. With Foxconn, Vedanta will hold on to a 63 per cent majority stake in the joint venture for the Gujarat semiconductor plant.
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