Vedanta Resources Plc, a London-based mining company, has reportedly announced plans to raise up to $8 billion through both debt and equity to acquire Bharat Petroleum Corp. Ltd.
People with knowledge of the matter have cited that the mining company is currently in talks with several banks to secure funds, which will lead to the appointment of an anchor bank. The statement further added that it has reached the advanced stage of discussions with an investment banking company, J.P. Morgan.
In November 2020, the conglomerate company revealed its preliminary interest in purchasing the government’s 53% stake in Bharat Petroleum. The sale, which is a part of the asset-sale program in India, is likely to generate the government over ₹45,000 crore ($6.1 billion). In addition, it will help make up for the lost revenue due to the COVID-19 crisis as well as secure funding to boost the economy.
As per the statement made by Vedanta, the company’s expression of interest (EoI) for Bharat Petroleum is to examine the potential synergies with the existing oil & gas business. This EoI is presently at a preliminary stage as well as exploratory in nature.
Sources further claimed that Vedanta is aware of the rising challenges in securing funds and is, therefore, targeting to gain the support of equity partners to jointly acquire Bharat Petroleum. Additionally, the company has initiated talks with various private equity funds across the globe to jointly bid.
However, Vedanta has been facing issues in meeting the debt obligation that will be maturing in the next quarters. This has raised the concerns of investors on how the company will successfully repay the bondholders.
In 2020, Vedanta reportedly raised the much-needed funding worth $1 billion in Asia, which the company plans to use to fund a buyback offer for $670 million, which will be matured in June 2021.
JP Morgan and Vedanta declined to immediately respond to requests for comments on the recent acquisition plan.