Vedanta tanks 6%, hits 52-week low after Moody’s rating downgrade


Vedanta shares fall: Shares of Vedanta fell 6.25 per cent to Rs 210 on the BSE on Wednesday after Moody’s Investors Service downgraded the corporate family rating for Vedanta Resources Ltd (VRL) to ‘Caa2’ from ‘Caa1’ earlier.

In the last three months, Vedanta’s stock has slipped 24 per cent compared to 5 per cent rise in the benchmark Sensex. Earlier, the stock had touched a 52-week low of Rs 222 on September 22.

Additionally, Moody’s has also downgraded the senior unsecured bonds issued by Vedanta Resources Limited (VRL) and guaranteed by VRL, a wholly owned subsidiary of VRL, and guaranteed by VRL from Caa2 to Caa3. . At the same time, he has maintained a ‘negative’ approach.

The rating agency said, “The downgrade reflects increased risk of debt restructuring over the next few months as VRL has made no meaningful commitments on refinancing of its upcoming debt maturities, particularly $1 billion of bonds maturing in January 2024 and August 2024.” Haven’t made progress.”

It should be noted that Vedanta Resources faces repayment of notes worth about $2 billion due in fiscal 2025. Including these bonds, the company faces debt repayments of $3.6 billion in the next financial year, according to Kotak Institutional Equities. As of March 2023, Vedanta’s debt/EBITDA stood at 3.7x.

Kaustubh Chaubal says, “The downgrade reflects increased debt restructuring risks over the next few months as VRL has not made any meaningful progress on the refinancing of its upcoming debt maturities, particularly the $1 billion bonds maturing in January 2024 and August 2024.” “Haven’t done it.” Senior Vice President at Moody’s and Principal Analyst at VRL.

“VRL’s consolidated debt/EBITDA leverage as of March 2023 was 3.7x – which is quite strong for its CaA category CFR. Still, the company faces challenges in refinancing its debt, a reflection of low appetite from the lending community and a major credit concern, Moody’s said in its note.

Moody’s said VRL sold a 4.3 per cent stake in key subsidiary Vedanta Ltd (VDL) for about $500 million in August 2023 to offset some of the pressure arising from Holdco’s impending cash needs.

Given that its entire shareholding in VDL and VDL’s entire 64.9 per cent stake in Hindustan Zinc Limited (HZL), which accounts for almost two-thirds of the group’s consolidated cash, has already been pledged, this means that VRL has limited financial flexibility to raise financing. ,

Moody’s said the negative outlook reflects VRL’s continued weak liquidity profile and Moody’s concerns over the company’s ability to meet imminent cash needs, particularly in the holdco.

Last week, on September 21, Vedanta’s board of directors had approved raising Rs 2,500 crore on private placement basis in the form of non-convertible debentures (NCDs). The company said the fund raising was part of its regular refinancing done in the normal course of business.

Earlier, in March, CRISIL had downgraded its outlook to negative from stable due to the possibility of higher-than-expected financial leverage and lower financial flexibility of the company.

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