Published: 03rd Oct 2024
By: Value Research
Vedanta will consider an interim dividend payout – its fourth this fiscal year–on October 8, 2024. Investors are rejoicing at the news. The stock jumped 7% in two days after the announcement on September 25.
Shelling out dividends could spell more doom than joy for Vedanta. In the last 2 years, its dividend payment of Rs 48,531 crore outdid its free cash flow of Rs 38,508 crore. So, it’s been making the payments using its cash reserves. Though it’s usual for large businesses to do so, but for Vedanta, this isn’t good news.
More than half of Vedanta’s dividend payouts are being paid to its parent company, Vedanta Resources, the largest stakeholder in the company (56%), to help pay off debt worth $9.7 billion or Rs 81,000 crore.
Vedanta has a couple of obligations to meet in the next 3-4 years. It has a capex plan of Rs 67,000 crore. And it may have to shell out nearly Rs 50,000 crore dividend over this period to help pare its parent’s debt worth Rs 25,000 crore that matures in 3 years. Lastly, its own debt of Rs 50,000 will also mature around the same time.
Our analysis shows Vedanta’s obligations over the next 3 years will likely outstrip its profitability. Thus, its dividend payouts aimed at helping its parent may actually end up stifling growth. To check the full analysis and the likely impact, read the full story from the link below