CLSA sees higher dividend from Vedanta going ahead

MUMBAI: Global brokerage CLSA said that Vedanta Ltd will have to significantly increase its dividend outgo in the financial year starting April so that its parent Vedanta Plc is able to pay interest on its debt of $6 billion.

Vedanta Plc has an annual interest outgo of Rs 0.4 billion and since it does not generate any cash of its own, it depends on Vedanta Ltd and Konkola Copper Mines (KCM) to service this interest payment, said CLSA.

"The Cairn merger and internal cash generation should provide the cash needed for this and any shortfall could be made up by higher dividends from HZL ( Hindustan Zinc)," said CLSA.

The stock is trading at an attractive 6% FY18 dividend yield, it added.

The brokerage said it is unlikely that Vedanta Ltd will give a loan to Vedanta Plc or buy KCM from Vedanta Plc. Both the options will require minority shareholder approval, which would be difficult and have the potential to drive a de-rating of Vedanta Ltd’s stock, it said.