Vedanta issues $1.25 bln convertible, ups iron ore

By Ruchira Singh and Eric Onstad

MUMBAI/LONDON (Reuters) - India-focused mining group Vedanta Resources Plc launched a $1.25 billion convertible bond on Friday and its iron ore unit unveiled plans to boost output by more than half, helped by a takeover.

Shares in London-listed Vedanta closed 6.1 percent lower at 1,639.74 pence, making it the biggest loser in the FTSE 100 index due to expected dilution from the issue and as investors sold holdings to raise funds to invest in the bond.

The group's Mumbai-listed Sesa Goa unit rose as much as 12 percent, the highest in a year, with the iron ore producer saying output would jump after it bought the mining assets of the Dempo Group for 17.5 billion rupees ($368 million).

The size of Vedanta's offering has been increased to $1.25 billion, from the announced size of $1 billion, under an option with sole bookrunner JP Morgan, at a conversion price of $36.48.

The offering will be used to help finance takeovers and to boost stakes in subsidiaries.

Investors have been pressing for a clean-up of complex cross holdings in the London-listed group, which posted a 75 percent fall in attributable profit last year, partly due to the impact of minority stakes.

In an initial stab at mopping up holdings, Vedanta said on Friday it spent $120 million to boost its Sesa Goa stake to 55 percent from 53 percent.

Vedanta has previously said it wants to boost stakes in units Bharat Aluminium Co. (Balco) and Hindustan Zinc, in which the Indian government holds stakes of 49 percent and 35 percent respectively, as well as Sterlite Industries, where minorities own 40 percent.