Vedanta Raises Rs 8k cr Loan from UBI to Prepay High-cost Debt

Metals and mining company Vedanta has raised Rs 8,000 crore secured term loan from Union Bank of India at 7.75% last month and used the proceeds to prepay high-cost debt raised at over 10% two years ago, people aware of the development said.

Vedanta will save at least Rs 200 crore interest cost annually upon refinancing Rs 10,000 crore secured term loans, a commodity analyst said.

Vedanta raised new money from Union Bank by pledging its Hindustan Zinc shares, sources said.


It prepaid a Rs 5,000-crore loan of State Bank of India, Rs 2,000 crore each of Bank of Baroda and Indian Bank, and Rs 1,000 crore loan of Yes Bank, one of the persons said.

Vedanta, SBI, Union Bank of India, Yes Bank and Bank of Baroda did not respond to ET's queries as of press time Thursday.

Indian Bank could not be reached for comments.

Vedanta's interest cost stood at Rs 1,066 crore for September 30, 2021, as per the latest results declared by the company. It will announce third-quarter results today.

This is the largest single-ticket loan provided by Union Bank to a double A-rated private company.

"The benefits of merging the PSU banks are reflected in such transactions which were not possible earlier," a bank analyst said.

In April 2020, Union Bank had acquired two state-owned banks - Andhra Bank and Corporation Bank - following directives from the central government. The merged entity now ranks among the top five PSU banks in terms of total business.

Union Bank's management committee on December 14 sanctioned an Rs 8,000 crore loan to Vedanta, the sources said.

Vedanta has pledged 14.8% shares of Hindustan Zinc with Union Bank as security among other things, one of the persons said.

As per the terms of the loan, if the shares of Hindustan Zinc fell below security cover, the company will deposit an equivalent amount with the bank to bridge the gap, the person said. The interest rate is pegged at 50 basis points spread over Union Bank's one-year MCLR, the marginal cost of fund-based lending rate which is now at 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 as non-convertible debentures in the last week of December, and Rs 1,000 crore was from internal accruals.