Vedanta Ltd will save at least Rs 200 crore in interest charges per year when refinancing secured term loans of Rs 10,000 crore, a commodity analyst has said.
Vedanta has raised new funds from Union Bank by pledging its Hindustan Zinc Ltd shares, sources said.
He prepaid a loan of Rs 5,000 crore from State Bank of India, Rs 2,000 crore each from Bank of Baroda and Indian Bank, and a loan of Rs 1,000 crore from Yes Bank, one of the people said. .
Vedanta, SBI, Union Bank of India, Yes Bank and Bank of Baroda did not respond to questions from ET as of press time Thursday. Indian Bank could not be reached for comment.
The interest cost of Vedanta Ltd stood at Rs 1,066 crore as of September 30, 2021, according to the latest results reported by the company. It will announce its third quarter results on January 28.
This is the largest single loan granted by Union Bank to a private double-A rated company.
“The benefits of the PSU bank merger are reflected in such transactions which were not possible before,” said a banking analyst.
In April 2020, Union Bank had acquired two state-owned banks – Andhra Bank and Corporation Bank – following central government directives. The merged entity now ranks among the top five PSU banks in terms of total business.
The management committee of Union Bank on December 14 approved a loan of Rs 8,000 crore to Vedanta, the sources said.
Vedanta has pledged 14.8% of Hindustan Zinc shares with Union Bank as collateral, among other things, one of the people said.
Under the terms of the loan, if Hindustan Zinc shares fell below the safety margin, the company would deposit an equivalent amount with the bank to make up the shortfall, the person said.
The interest rate is set at 50 basis points spread over Union Bank’s one-year MCLR, the marginal cost of funds-based lending rate which is now 7.25%.
Of the Rs 10,000 crore prepaid, Rs 8,000 crore was raised from Union Bank, Rs 500 crore each was raised from IDBI Bank and Canara Bank in the form of non-convertible debentures during the last week of December, and Rs 1,000 crore came from internal adjustments.
Vedanta chairman Anil Agarwal told PTI on Wednesday that by the end of March the company would give details of its plans to spin off its aluminum, iron and steel, oil and gas businesses. as stand-alone entities and list them separately.