CRISIL Ratings places Vedanta under watch with negative implications

The agency mentioned that the ratings might be downgraded if Vedanta cannot reduce its end-of-year financial leverage to below 2.7 times through the asset monetisation route

CRISIL Ratings on Thursday placed the long-term bank facilities and debt instruments of Vedanta Limited under 'rating watch with negative implications', the agency said in a press statement.  

CRISIL said the ratings may also be downgraded if Vedanta is not able to bring down its end-of-year financial leverage to below 2.7 times through asset monetisation, which is to be completed by December this year. Vedanta had earlier identified possible options for monetisation of assets like the steel and iron ore businesses.

The agency has also reaffirmed its ‘CRISIL A1+’ rating on the short-term debt instruments of the company. “The rating watch factors the recent demerger4 announcement by Vedanta,” CRISIL said in its note. The ‘negative watch’ indicates the likelihood of rating downgrade if Vedanta is not able to complete its refinancing before October end, as expected earlier by CRISIL Ratings, the note aid.

On the promoter company’s debt reduction plans and Vedanta’s planned asset monetisation, the agency said, “Successful and timely completion of both events (refinancing at Vedanta Resources and debt reduction through inorganic means) has become critical for sustaining the ratings at the current levels.”

“Any further delay in the refinancing or correction in the financial leverage to below the rating threshold can lead to a rating downgrade,” CRISIL said.