Moody’s Downgrades Vedanta Resources’ CFR Rating to Caa1; Shares are up more than 4%

Last updated time: March 10, 2023 at 3:52 PM IST

Vedanta is a diversified natural resources company.

Shares of Vedanta Ltd fell more than 4 percent after Moody’s Investors Service downgraded the holding’s rating.

Shares of Vedanta Ltd fell more than 4 percent after Moody’s Investors Service downgraded its holding company Vedanta Resources Limited’s (VRL) corporate family rating (CFR) to Caa1 from B3 due to increased refinancing risks on debt maturities. The rating forecast remains negative.

Shares of Vedanta were trading at Rs 272.55, down 4.54% from their previous close of Rs 285.50 on the BSE. Vedanta shares have lost 26.43% in the year and are down 9.8% year-to-date. A total of 5.19 lakh shares of the firm changed hands with a turnover of Rs 14.48 crore on BSE. The market value of the firm fell by Rs 1.03 crore.

“Continued delays in Vedanta Resources’ refinancing efforts and its reliance on dividend income will reduce the liquidity of its operating subsidiaries,” Moody’s said.

Concerns over Vedanta’s debt repayment obligations came after the government opposed the sale of its international zinc business to India Zinc.

“Previously, we expected that holdco VRL would generate enough funds through loans and dividends to meet its debt maturity by June 2023. However, in a financing environment that remains challenging with high interest rates, deficits, VRL faces persistent delays in obtaining funds relative to our previous expectations. market liquidity and tight credit availability,” added Chaubal, also Moody’s lead analyst for VRL.

“These issues expose the company to significant refinancing risks and increase the likelihood of payment defaults or defaults.”

Technically, Vedanta’s Relative Strength Index (RSI) stands at 40, which indicates that the stock is neither overbought nor oversold. The stock has a one-year beta of 1.4, indicating very high volatility over the period. Vedanta stock is trading below its 5-day, 20-day, 50-day, 100-day and 200-day moving averages.

Earlier, S&P Global Ratings said the company’s credit rating “may come under pressure” if it fails to raise $2 billion or sell its international zinc assets.

In a rating action announced on Friday, Moody’s downgraded the senior unsecured bond ratings of Vedanta Resources and its unit Vedanta Resources Finance II Plc from Caa1 to Caa2.

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