Promoters of Anil Agarwal-led Vedanta Ltd has pledged and encumbered their entire stake of 55.11% equity with OCM Verde Investment in order to fund Vedanta Resources’ outstanding debt of $900 million and for acquisition of up to 11.5% shares in Vedanta Ltd by the promoter group, Vedanta Mauritius Limited, the company said.
“A subscription agreement dated 23rd December has been entered into between Vedanta Holdings Mauritius Limited and the other promoters of Vedanta Ltd with OCM…Under the agreement the issuer shall issue US$ 400,000,000 notes of nominal value $1 in favour of OCM,” said a statement by OCM Investment in the BSE Filing on Tuesday.
Given the nature of arrangement under the envisaged agreement, one or more of the shares are falling under the definition of encumbrance, said Vedanta Limited.
As per the subscription agreement, a charge has been created on all the issued shares of the issuer…to secure the obligation, the statement said adding that there are certain conditions on the promoter group entities to create any security, sell or transfer or dispose any of their shares in Vedanta Ltd held by them.
The promoter entities here include Vedanta Mauritius Limited, Finsider International, Westglobe Limited, Welter Trading Limited and Twin Star Holdings Limited. The total promoter shareholding in the entity is 2,048,618,788 number of shares with 55.11% holding.
“This will not have any impact on the company as this is a very common practise by promoter groups,” said an analyst requesting anonymity.
“It is something called an encumbrance, meaning banks have taken an additional security so that there is no change in control. For the shares pledged against the debt taken, an encumbrance is created so there is no change in control,” said the analyst.
The company on December 21st had pledged around 50.13% of the total capital with CitiCorp International Limited. This was in relation to the debt raised by Vedanta for US$ 1 billion of 13.87% senior bonds due by 2024.
“The funds raised will be used to fund the tender offer for any and all of Vedanta Resources Limited’s outstanding US$ 900 million of 8.25% bonds due in 2021…and any proceeds shall be used to service debt of VRL or other subsidiaries,” the company said in its BSE Filing.
Vedanta Ltd did not respond to the email queries sent.
On December 28th , Vedanta Holdings Mauritius II, a part of Vedanta Limited’s promoter group bought around 18.5 crore shares in the Indian listed company at a price of about Rs. 160/share. This increased the promoter shareholding in Vedanta Limited from 50.13% to 55.11%.
On Tuesday, the promoter group entities pledged the 55.11% holding with OCM Verde XI Investment against a debt of 400 million notes of nominal value $1 raised.
“The proceeds shall also be used towards payment of any fees, costs, and expenses in connection with the transaction contemplated,” the company said.
This comes two months after the company failed to garner the required number of shares to delist Indian subsidiary Vedanta.
The total number of shares validly tendered by the public shareholders in the delisting offer is 125.47 crore, which is less than the minimum number of shares required to be accepted by the acquirers in order for the delisting offer to be successful, the company said in an exchange filings. The company is now in a cooling off period and is yet to take a call on going for delisting again.
Shares of Vedanta Ltd dropped 2.2% to Rs 160.15 apiece after the announcement.
Credit: Stocks-Markets-Economic Times