Debt-laden Tata Motors, Vedanta see rise in credit default swaps

Both companies are heavily in debt, posing a risk to their financial health

Spreads on the credit default swaps (CDS) of Tata Motors and Vedanta Resources have widened from their three-month average, contrary to the fall in spreads of the same instrument of other Indian companies, indicating that investors are getting nervous about the two Indian conglomerates.  

A CDS is the insurance premium paid by a bond holder to protect against a possible default. Widening of spreads doesn't necessarily mean the companies are going to default, but it is a reflection of risk perception based on financials and other headwinds.  

Bloomberg data shows Tata Motors' CDS presently is at 331.01 basis points, against its three