Vedanta Aluminium Banks on Rs 13,500 Crore Loan After De-merger, Securing Funding from Major Indian Banks

Vedanta Aluminium Banks on Rs 13,500 Crore Loan After De-merger, Securing Funding from Major Indian Banks​

Vedanta Aluminium Metal Ltd., a unit of the larger Vedanta Group conglomerate, is securing significant financing amounting to approximately ₹13,500 crore. This funding comes from a consortium led by major lending institutions including Axis Bank, HDFC Bank, and ICICI Bank. The deal marks one of the first large-scale local currency loans undertaken by the entity following its formal split from the integrated conglomerate structure controlled by Anil Agarwal.

Strategic Financing Post De-merger​

Axis Bank Ltd. has committed to a loan agreement totaling ₹55 billion for Vedanta Aluminium Metal Ltd. Concurrently, HDFC Bank and ICICI Bank are set to collectively extend approximately ₹80 billion to the newly independent company. The lenders plan to syndicate portions of this loan, with Axis Bank taking the lead in launching the financing initiative.

The terms agreed upon for this corporate lending deal range between 6 to 7 years. Interest rates offered by the banks are stated to be within the 7.9% to 8% bracket. These funds will be specifically utilized to refinance existing debt inherited by Vedanta Aluminium from the previous, integrated company structure.

Strengthening Financial Flexibility Through Corporate Restructuring​

This major fundraising effort underscores Vedanta's determined push toward establishing independent and financially agile businesses. The demerger process, which was approved by an Indian court in December, aims to provide these specialized entities with greater financial flexibility and assist in debt reduction.

The group has recently restructured its operations, dividing its various businesses into five distinct listed companies. Four of the newly focused firms, which began trading on stock exchanges in June, pertain specifically to aluminum, power, oil and gas, and iron ore production.

Credit Demand Surges Amid Corporate Cleansing​

Credit demand within India is witnessing a marked surge, driven by corporate entities seeking necessary debt refinancing and operational support. According to data from the Reserve Bank of India, bank lending expanded by 17.7%, reaching ₹217.3 trillion as of July 15. This growth represents an almost doubling compared to the same period last year.

Analysts have noted improvements in the group's financial health. Last month, Crisil Ratings, the local arm of S&P Global, upgraded several Vedanta firms. Crucially, they raised Vedanta Aluminium’s rating to AA+ with a stable outlook, citing enhanced financial flexibility across the group.

ICICI Securities previously issued a report projecting that Vedanta Aluminium's net debt could fall below ₹100 billion by the financial year 2028. This projection is supported by the company's robust and strong cash flow generation capabilities.