Vedanta raises Rs 6K cr, to up Sesa Goa stake

Anil Agarwal-controlled Vedanta Resources Plc has raised $1.25 billion (Rs 6,000 crore) of convertible bonds to fund expansion, acquisitions and increased stakes in subsidiaries. This is the largest such issue by an Indian company.

The company further said that it has made an offer to subscribe to an additional 33.27 crore shares of its Indian stock exchange listed subsidiary Sesa Goa. The total cost of this subscription will be $120 million. The company said the transaction is expected to be complete by July 2009, subject to shareholders’ approval. Post the transaction, Vedanta’s stake in Sesa will go up to 55% from 53.1% currently.

Vedanta will pay 5.5% interest semi-annually in arrear on the bonds due in 2016, the London-based company said in a Regulatory News Service statement. The conversion price is $36.48, representing a premium of 35% to the volume weighted average price (VWAP) of the ordinary shares on the London Stock Exchange on Friday and represents a 46% premium to the 30-day VWAP.

“The net proceeds will also provide the group with additional flexibility to finance acquisitions. Priority in allocation of the bonds will be given to existing shareholders of the company. The major shareholder, Volcan Investments, has indicated it will not participate in the transaction,” Vedanta said in a statement. 

Volcan Investments is the investment company of Agarwal.The company is expecting the settlement for the bond issue to be completed by July 13. It said, “It is intended that an application will be made for the bonds to be listed on the official list and admitted to trading on the professional securities market of the LSE.”

Shares of Sesa Goa unit rose as much as 12%, the highest in a year, with the company saying output would jump after it bought the mining assets of the Dempo Group for Rs 1,750 crore on Thursday.

The Dempo acquisition would help Sesa lift iron ore output by more than half to 22.75 million tonnes in 2009-10, Reuters quoted the company’s managing director PK Mukherjee as saying. “Last year, we had a production of 15 million tonnes. This year, we are likely to have a volume growth of 25%. Plus, you could add 4 million tonnes (from the acquisition)”.