Vedanta Aluminium Metal Ltd., a key unit of the Vedanta Group, is in the process of securing a substantial loan package totaling approximately ₹13,500 crore ($1.4 billion) from three prominent Indian banks. This marks a significant local-currency borrowing initiative following the conglomerate's recent corporate restructuring.
Major Banks Participate in Loan Agreement
According to reports citing individuals familiar with the transaction, Axis Bank has already committed ₹5,500 crore to Vedanta Aluminium Metal Ltd. HDFC Bank and ICICI Bank are collectively expected to provide an additional ₹8,000 crore to the company. Axis Bank is also slated to lead the syndication process for a portion of this mega loan.
The loans are structured with tenors ranging from six-and-a-half to seven years, and the banks are reportedly offering interest rates between 7.9% and 8%. Representatives for Vedanta Group, Axis Bank, ICICI Bank, and HDFC Bank have not yet publicly commented on the development.
Refinancing and Corporate Restructuring
The primary purpose of this substantial fundraising is to refinance existing debt that Vedanta Aluminium inherited under the group's previous integrated corporate structure. This move aligns with Vedanta's broader strategy to establish independently financed businesses following a comprehensive corporate restructuring, which aims to enhance financial flexibility and reduce overall debt.
The new corporate structure, which received approval from an Indian court in December, has seen Vedanta split its operations into five distinct, separately listed companies. Four of these entities, focusing on aluminium, power, oil and gas, and iron ore, commenced trading on stock exchanges in June.
Context of India's Credit Demand
This refinancing effort by Vedanta Aluminium occurs amidst robust credit demand across India. Data from the Reserve Bank of India indicates that bank lending surged by 17.7% year-on-year to ₹217.3 lakh crore as of July 15, nearly doubling the growth rate observed during the corresponding period in the previous year. This strong market for credit provides a favorable environment for large-scale corporate borrowings such as Vedanta's.