Vedanta shares plunge 9%; here’s why

Shares of Vedanta, one of the country’s leading mining company, tumbled nearly 9% in intraday trade on Tuesday amid strong volume trade. The mining heavyweight has been falling for the last eight straight sessions and lost nearly 17% during this period.

Continuing its losing streak, Vedanta share price opened 2% lower at ₹281.65 against the previous closing price of ₹287.35 on the BSE. During the session so far, the largecap stock dropped as much as 8.8% to hit a four-month low of ₹262 on the BSE. The market capitalisation of the Anil Agarwal-led company slipped below ₹1 lakh crore mark to ₹99,806 crore. On the volume front, 14 lakh shares changed hands over the counter on the BSE as compared to the two-week average volume of 4.02 lakh stocks.

Vedanta delivered a negative return of 29.5% to its shareholders in the last one year, while it rose nearly 2% in the six-month period. On the year-to-date (YTD) basis, the stock has fallen over 15%, while it lost more than 19% in a month and 12% in a week. The counter touched a 52-week high of ₹440.75 on April 11, 2022, while it slipped to its 52-week low of ₹206.10 on July 1, 2022.

What fuelled sell-off in Vedanta shares?

The recent sell-off in Vedanta shares was triggered by deepening concern about its proposal to sell its international zinc assets to subsidiary Hindustan Zinc and strong U.S. dollar that led to the depreciation of Vedanta bond yield to 'junk' levels. The uncertainty regarding its $2 billion fundraising exercise further dented market sentiments.

As per a report, the Centre is not happy with Vedanta's proposal to sell international zinc assets, as the government feels the move would affect its plan to divest its 29.54% residual stake in Hindustan Zinc. The Centre has opposed Vedanta plans to sell its international zinc business to Hindustan Zinc for nearly $3 billion, flagging several concerns, including the rationale and valuation of the assets. Vedanta Resources, the London-listed parent of Vedanta, holds a 70% stake in Vedanta, which in turn owns 65% per shares in Hindustan Zinc.

Recently, S&P Global Ratings said the liquidity of Vedanta Resources’ depends on a $2 billion fundraising plan and the proposed sale of international zinc assets. The foreign brokerage said that Vedanta Resources’ rating is likely to come under immediate pressure if neither of these transactions progresses over the coming weeks.

"The next few weeks will be crucial for Vedanta Resources Ltd. The company is highly likely to meet its obligations until September 2023…However, sustaining liquidity beyond that would depend on the completion of at least one of two key ongoing transactions: a targeted $2 billion fundraising exercise, and a proposed sale of international zinc assets by Vedanta (Vedanta Resources has 70%) to Hindustan Zinc (Vedanta has 65%ownership)," S&P said in a report earlier this month.

Vedanta Resources is fully funded until March 2023, following a dividend declared by Vedanta in January, the agency said. The company faces a crucial test going ahead as its $500 million of loan repayments is due in the December quarter of 2023, and a $1 billion bond in January 2024.