“We remain overweight on VEDLN (Vedanta Ltd) and its bonds (’28s, ’29s, ’30s, ’31s) while being Neutral on VEDLN ’33s,” JP Morgan analyst Love Sharma said.
Stating that it remains comfortable with Vedanta’s leverage and the government’s oversight of Hindustan Zinc, the brokerage said it considers Vedanta to be cheap within Asia and within the EM metals and mining space with healthy EBITDA generation ($5bn run-rate), improving funding access ($1bn bank loans have been raised by VRL in FY26), and attractive yields (~8-10%).
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“We have generally focussed on Vedanta Ltd’s cash flows and earnings excluding Hindustan Zinc (HZL) to unravel the key drivers of the credit. VDL (ex-HZL) reported EBITDA of $3.1bn in FY25 and a net leverage of 2.2x. We struggle to see financial stress at VDL with these metrics. For HZL, net leverage was 0.1x. HZL has capex plans and we see net leverage going up to 0.5x,” Sharma said.
On Hindustan Zinc, he said the government had call/put options requiring Vedanta to purchase/sell government’s or its stake at a 50% premium/discount to the market price of HZL shares.”These options could be exercised within 90 days of the GoI becoming aware of a default on a particular condition related to the completion of a smelter plant in a specific location. The project was to be completed by 2007, but HZL completed the smelter at a different location after informing the GoI. We would be surprised if any breach had not been identified by the GoI over the past ~20 years,” he said.On Thursday, Viceroy Research released an 87-page report claiming that Vedanta Ltd’s parent entity Vedanta Resources (VRL) is a “parasite” running a “ponzi scheme” that has “pushed the entire group to the brink of insolvency”.
Alleging that the entire group structure is “financially unsustainable, operationally compromised, and poses a severe, under-appreciated risk to creditors”, it said it is short the debt stack of VRL.
The firm claims VRL, the heavily indebted parent company, is a “parasite” with no significant operations of its own, surviving entirely by draining cash from its “dying host” – Vedanta Limited.
After falling over 3% in previous session, Vedanta shares were trading near marginally lower in the afternoon session.
