Moody's Lowers Vedanta Resources'CFR Rating to Caa1; Shares Slip Over 4%

Vedanta Ltd shares tanked over 4 per cent after Moody’s Investors Service downgraded its holding company Vedanta Resources Limited’s (VRL) corporate family rating (CFR) to Caa1 from B3 over increasing refinancing risks in debt maturities. The outlook for the rating remains negative.

Vedanta stock fell 4.54% to Rs 272.55 against the previous close of Rs 285.50 on BSE. Vedanta shares have lost 26.43 per cent in a year and fallen 9.8 per cent since the beginning of this year. Total 5.19 lakh shares of the firm changed hands amounting to a turnover of Rs 14.48 crore on BSE. Market cap of the firm fell to Rs 1.03 lakh crore.

“Ongoing delays in Vedanta Resources’ refinancing efforts and its continued reliance on dividend receipts are depleting liquidity at its operating subsidiaries,” Moody’s said.

Concerns over Vedanta’s debt repayment liabilities surfaced after the government opposed the proposed sale of the international zinc business to Hindustan Zinc.

“We previously expected holdco VRL to find sufficient funds through loans and dividends to address its debt maturities until June 2023. However, VRL faces ongoing delays in obtaining funds relative to our earlier expectations amid a funding environment that remains challenging with high interest rates, scarce market liquidity and tight credit availability,” added Chaubal who is also Moody’s Lead Analyst for VRL.

“These issues expose the company to material refinancing risks and exacerbate the likelihood of a payment default or a distressed exchange.”

In terms of technicals, the relative strength index (RSI) of Vedanta stands at 40, signaling neither the stock is overbought nor oversold. The stock has a one-year beta of 1.4, indicating very high volatility during the period. Vedanta stock is trading lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

Earlier, S&P Global Ratings stated that the company’s credit ratings might “come under pressure” if it is unable to raise $2 billion or sell its international zinc assets.

In the ratings action announced on Friday, Moody’s has also downgraded the ratings on the senior unsecured bonds issued by Vedanta Resources and its arm Vedanta Resources Finance II Plc to Caa2 from Caa1.

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