Vedanta Shares Plummet Over 6% in Early Trade: Here's Why

Shares of Vedanta dipped 6.5% to Rs 424.50 on the Bombay Stock Exchange (BSE) during Wednesday's intra-day trade after over 2% of the company’s equity changed hands via block deals. This sudden drop came as a result of significant share transactions.

Stake Sale Announcement

Vedanta Resources announced its decision to sell a 2.6% stake in the Indian metals-to-oil firm to a group of institutional investors. This move was unexpected, especially given the recent statement by Vedanta Chairman Anil Agarwal.

Just a week prior, Agarwal had asserted that there were no plans for a stake sale by the company's controlling shareholders, making this announcement a surprising turn of events.

Details of the Stake Sale

The stake will be sold through Vedanta Resources' unit, Finsider International. As of the end of March, Finsider International held a 2.63% stake in the Mumbai-listed Vedanta. The specifics of the financial deal and the identities of the investors involved were not disclosed by the firm.

Financial Context

Vedanta Resources has been under financial pressure, with a debt of $6 billion as of March 31. The company has faced multiple rating downgrades due to liquidity issues and a high risk of default.

To address these challenges, Vedanta Resources aims to reduce its debt by $650 million in fiscal 2025 through the stake sale. This strategic move is intended to improve the company's financial stability and address its liquidity problems.

Market Reaction

At around 11:11 am on Wednesday, Vedanta's shares showed some recovery but were still down 2.84%, trading at Rs 441.20 on the BSE. The initial sharp decline was a direct response to the unexpected announcement and the significant share transactions that took place.

Conclusion

The drop in Vedanta's shares highlights the market's sensitivity to changes in company strategy and financial maneuvers. The unexpected stake sale, especially following a statement denying such plans, caused immediate concern among investors.

However, Vedanta Resources' move to sell a portion of its stake aims to address its substantial debt and improve its financial outlook. As the company progresses with its debt reduction plan, investors will be watching closely to see how these changes impact Vedanta's long-term performance and stability.