Vedanta tanks 6% as Moody's downgrades corporate family rating to Caa2

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, Moody's said

Shares of Anil Agarwal-led Vedanta tumbled 6.25 per cent to Rs 210 apiece on the BSE on Wednesday after Moody's Investors Service downgraded the corporate family rating for Vedanta Resources Limited (VRL) to 'Caa2' from the earlier 'Caa1'

Moody's has also downgraded its rating  to 'Caa3' from 'Caa2'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. At the same time, Moody's has maintained the negative outlooks. READ MORE

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, the agency said.

At 9:35 AM, shares of the company were trading 5.5 per cent lower at Rs 211.6 per share as against 0.37 per cent (243 points) decline in the benchmark S&P BSE Sensex. The BSE Metal index, meanwhile, was down 0.8 per cent. 

A combined 9.85 million shares have, thus far, changed hands in trades on the BSE and NSE. 

"Given VRL's entire shareholding in Vedanta Ltd (VDL) and that VDL's entire 64.9 per cent shareholding in Hindustan Zinc Limited (HZL), which holds around two-thirds of the group's consolidated cash, have already been pledged, this implies VRL has limited financial flexibility to raise financing," Moody's said.

Notably, the action from the agency comes days after Vedanta's board of directors approved raising Rs 2,500 crore on a private placement basis, as non-convertible debentures (NCDs).

"These would be raised in the form of secured, unrated, unlisted, redeemable NCDs in one or more tranches," it had said on September 21. 

As of June 2023, the company reported a consolidated debt of Rs 73,500 crore and a net debt of Rs 59,200 crore. The company has about Rs 11,000 crore coming up as long-term debt maturities in the current financial year. READ HERE

The company had closed a consolidated net profit of Rs 2,640 crore for the April-June quarter, down about 40 per cent from Rs 4,421 crore reported in the same quarter last year. Its revenue from operations had also declined 13 per cent to Rs 33,342 crore in Q1-FY24 compared to Rs 38,251 crore reported in Q1-FY23.

So far in the current calendar year, shares of Vedanta have tumbled over 30 per cent as against a 8-per cent rise in the benchmark index.