Vedanta hits 52-week low after Moody's downgrades Vedanta Resources' CFR to Caa2

Vedanta share price NSE:  Shares of Anil Agarwal-led mining major Vedanta on Wednesday, September 27, dipped over 7 per cent to hit a 52-week low of Rs 208.1 apiece, thereby continuing the losing streak for the seventh straight session. The stock breached the previous 52-week low of Rs 222.55 touched last week.

Investor sentiment was weak after Moody's Investors Service downgraded the corporate family rating (CFR) of Vedanta Resources Ltd., the parent company of India-listed Vedanta Ltd to Caa2 from Caa1 over elevated risks of debt restructuring over the next few months. Vedanta shares ended 6.88 per cent or Rs 15.4 lower at Rs 208.6 on NSE.

Moody's has also downgraded its rating on the senior unsecured bonds issued by VRL and those issued by VRL's wholly owned subsidiary, Vedanta Resources Finance II Plc, and guaranteed by VRL, to Caa3 from Caa2 earlier.

In addition, the global rating agency has maintained a negative outlook on the company. Kaustubh Chaubal, Moody's Senior Vice President and lead analyst on VRL, said, "The downgrade reflects the elevated risk of debt restructuring over the next few months because VRL has not made any meaningful progress on refinancing its upcoming debt maturities, in particular the $1 billion bonds maturing each in January 2024 and August 2024."

Here's how the counter moved on Wednesday: 

Source: NSE

"VRL's credit quality is constrained by its weak liquidity because of large refinancing needs and interest expenses amid tightening financing conditions in global capital markets." Moody's report added.

"The negative outlook reflects VRL's persistently weak liquidity profile and Moody's concerns over the company's ability to address the imminent cash needs, especially at the holdco," the report added.

Moody's, in its report, added that they are unlikely to upgrade VRL's ratings or revise its rating outlook to stable prior to the company substantially improving its liquidity profile. Any potential rating upgrade will depend on the company meeting its refinancing needs over at least the upcoming 12–18 months as well as establishing a sustainable capital structure.

"Moody's could downgrade VRL's ratings further if the company fails to make progress on funding arrangements to service its debt such that the risk of default increases materially higher than indicated by the current ratings, the report further said.

Vedanta Resources Limited 

Headquartered in London, VRL is a diversified resource company with interests mainly in India. Its main operations are held by Vedanta, a 63.8 per cent-owned subsidiary. Through VRL's various operating subsidiaries, the group produces oil and gas, zinc, lead, silver, aluminium, iron ore, steel, and power.

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