Sells stake in Anglo American

Profit falls 12% to ₹1,351 crore on falling commodity prices

Published - July 26, 2019 10:08 pm IST - Mumbai

Anil Agarwal-led Vedanta Limited has sold its stake in Anglo American with superior gains, giving rest to speculation that the mining baron will launch a bid to acquire the global miner.

However, the sale, with a net gain of over $100 million, couldn’t enable the firm to improve its profitability as net profit for the first quarter fell 12% to ₹1,351 crore.

Cairn India Holdings Limited (CIHL), an overseas subsidiary of the company, and Volcan Investments Limited, had agreed to unwind entirely the structured investment entered into between them in December 2018 ahead of the originally envisaged schedule.

Commenting on the deal, Srinivasan Venkatakrishnan, CEO, Vedanta Limited, in analyst conference call said, “We made a structured investment in December last year as a part of cash management activities and following the exercise, we have no exposure to the shares of Anglo American. We have made net gains of $100 million in the eight-month period.”

Company’s revenue during the quarter fell by 4% to ₹21,167 crore, primarily due to lower commodity prices.

“With this, Volcan will exercise the early exchange option available to it on July 26 and consequent to this, the full exchange of its two issues of mandatory exchangeable bonds secured by shares in Anglo American Plc. will settle on August 12. The share price of Anglo American has close to doubled, since Volcan invested, delivering attractive gains to all investors,” said a company statement adding that cash proceeds from the settlement of the transaction will be paid to CIHL on August 13.

Vedanta’s EBITDA for the quarter stood at ₹5,188 crore, lower by 20% y-o-y, mainly due to lower commodity prices partially offset by easing of input commodity inflation,rupee depreciation and volume addition from ESL acquisition.

Company’s EBITDA margins during the quarter fell to 27% compared to 34% in Q1 FY2019.

“Our strategy continues to be to focus on our existing businesses, where we believe that there are significant opportunities to unlock their full potential. The unwinding reflects our disciplined approach to treasury management and capital allocation together with our commitment at all times to act in the interests of all shareholders,” said Mr. Venkatakrishnan.

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