Vedanta may use ESL Steel's proposed fundraising for parent company's debt: Viceroy Research

Economic Times
Economic Times
1w ago • 9 views
Vedanta plans to use ESL Steel's fundraising to address its parent company's debt obligations, raising concerns about the steel unit's financial health.
Vedanta may use ESL Steel's proposed fundraising for parent company's debt: Viceroy Research
A What happened
Vedanta is planning to raise ₹2,000 crore through its subsidiary ESL Steel, but Viceroy Research suggests that the funds will not benefit ESL Steel directly. Instead, they will likely be used to meet the debt obligations of Vedanta Resources, the parent company. This move comes as Vedanta faces a $206 million funding deadline for Konkola Copper Mines. Viceroy has criticized ESL Steel's financial performance, noting its negative cash flow in five of the last seven years and minimal earnings before interest and tax. The situation raises concerns about the sustainability of ESL Steel and the overall financial strategy of Vedanta Resources, indicating a potential shift in how the company manages its debts and investments.
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Key insights

  • 1

    Financial Struggles of ESL Steel: ESL Steel has reported negative cash flow in five of the last seven years.

  • 2

    Debt Obligations Looming: Vedanta Resources faces a $206 million funding deadline for Konkola Copper Mines.

  • 3

    Shift in Financial Strategy: Funds from ESL Steel's fundraising may indicate a change in Vedanta's financial management approach.

Takeaways

The proposed fundraising by ESL Steel highlights the financial challenges faced by Vedanta Resources and raises questions about the sustainability of its subsidiaries. The reliance on this fundraising to meet debt obligations suggests a critical need for a reassessment of financial strategies within the company.

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