What Vedanta's Third Interim Dividend Of Rs 17.50 Per Share Means
The company rewards shareholders and parent Vedanta Resources to ease its debt woes.
Vedanta Ltd. has announced an interim dividend of Rs 17.50 per share or 1,750%, rewarding shareholders for the third time this fiscal.
The record date for the dividend has been fixed as Nov. 30, 2022.
The miner has so far declared a total dividend of Rs 68.50 per share in FY23 compared with Rs 45 per share in FY22.
In FY23, the company paid its first interim dividend of Rs 31.5 per equity share in May, followed by the second interim dividend of Rs 19.5 per share in July. At the current market price of Rs 307.70, the total payout translates into a dividend yield of 5.68%.
Cost To Company
Vedanta's third payout of the year will cost Rs 6,505 crore, taking the total disbursements to shareholders to Rs 25,465 crore so far in FY23. That's 52% higher than what it paid in FY22.
That, however, will worsen its net debt profile as Vedanta's cash flows are being used to pay dividend.
Why Dividend Is Important For Its Parent
Dividend payment is crucial for Vedanta Resources Ltd., the London-based parent of Vedanta Ltd., as its bonds worth $4.7 billion will mature in the next four years, including $900 million of notes due in the first half of 2023, according to data compiled by Bloomberg.
The company has already trimmed its debt by about $1.3 billion in H1FY23 against a target of $4 billion over three years. To repay debt, Vedanta Resources is dependent on dividend payouts from its listed Indian unit Vedanta Ltd., which recently reported a sharp drop in profits.
Moody’s Downgrades Vedanta Resources
Moody's Investors Service recently downgraded the corporate family rating of Vedanta Resources to 'B3' from 'B2', citing the holding company's persistently weak liquidity profile.
It also downgraded senior unsecured bonds issued by VRL, Vedanta Resources Finance II Plc and guaranteed by VRL to 'Caa1' from 'B3'. The outlook on the ratings remains negative, it said.
Vedanta Resources, which owns 70% of Vedanta Ltd., asked Moody’s earlier this month to withdraw all the outstanding ratings on it following disagreements with the credit rating agency’s decision to cut its debt into the junk category. The assessor had flagged the firm’s persistently weak liquidity and high refinancing needs with large, looming debt maturities.
Vedanta’s cash cow, Hindustan Zinc announced a dividend of Rs 6,500 crore last week. The board approved a dividend of Rs 15.50 a share or 775% for FY23. Parent Vedanta Ltd., which holds a 64.92% stake, is expected to get nearly Rs 4,251.8 crore of the total interim dividend of Rs 6,549.2 crore.
Since Vedanta’s failed attempt to delist shares in October 2020, the company has announced a total dividend of Rs 123 per share. During the period, Vedanta’s stock price rose 180%, from Rs 110 per share in October 2020 to Rs 307.7 per share currently.
Vedanta Ltd.'s net debt rose by Rs 11,100 crore in the first two quarters of FY23 to Rs 32,100 crore as of September.