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Prolonged closure of Tuticorin smelter plant credit negative for Vedanta: Moody's

Press Trust of India  |  New Delhi 

The prolonged shutdown of Vedanta's copper smelter facility at Tuticorin in would be credit negative for the company and marginally increase leverage, said today.

"A prolonged shutdown would be credit negative for Vedanta because of the potential loss of revenue and earnings from its copper operations in India," the rating agency said in a statement.

Last week, UK-based announced that the Board had rejected the company's application to renew its right to operate the copper smelting facility at Tuticorin.

The facility that closed for a 15-day scheduled maintenance turnaround on March 27 is still remained shut.

Vedanta owns one of the two custom copper smelters in and, according to International Copper Association, had a

33 per cent market share by sales volume in 2016-2017.

The other major custom copper smelter in is operated by Hindalco Industries Ltd.

"How long the Tuticorin copper facility will be shut is not known. If we assume Vedanta's consent-to-operate licence is not renewed for one year, the company's pro forma revenue for calendar year 2017 would decline 25 per cent to $10.8 billion from $14.4 billion, and its reported EBITDA would decline 5 per cent to $3.6 billion from $3.8 billion, as shown in the exhibit," Moody's said.

Despite the smelter shutdown, Vedanta said that it will pursue its plans to expand production capacity at Tuticorin, doubling it to 800,000 tonnes per annum from 400,000 tonnes per annum at the end of 2017 by adding a second copper smelter.

"At year-end 2017, the company had spent about 15 per cent of the second smelter's USD 576 million projected cost," it said.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, April 16 2018. 19:50 IST