Vedanta receives downgrade in credit rating

Vedanta announced that India Ratings and Research (Ind-Ra) has downgraded the rating of the company to IND AA- from previous rating of IND AA with a negative outlook.

The announcement was made after market hours yesterday, 27 May 2020. Shares of Vedanta shed 0.06% to close at Rs 87.85 on 27 May 2020.

Ind-Ra said it continues to take a consolidated view of Vedanta and its subsidiaries and has factored in the debt of the parent company, Vedanta Resources Plc. (VRL), while arriving at the ratings.

The downgrade reflects likely deterioration in Vedanta's credit profile following a substantial decline in economic activity due to the COVID-19-related lockdown, with the balance sheet leverage remaining elevated in FY21 and FY22.

The negative outlook reflects the risk of a further spread of the outbreak, and the resultant global demand shock leading to a prolonged subdued pricing environment. Also, the outlook reflects the elevated risk of refinancing, with material debt repayments coming due at both Vedanta and VRL in FY21 against the backdrop of general risk averseness in debt capital markets towards cyclical sectors.

The agency believes VRL's proposal to de-list Vedanta would lead to a further increase in the balance sheet leverage in the short run, but it would be moderately credit positive for Vedanta in the medium term, as it would reduce the group's structural subordination and improve the liquidity.

Vedanta is a diversified natural resources player, with a significant presence in zinc, oil and gas, copper, aluminium, iron ore, and power.

Powered by Capital Market - Live News