India Ratings and Research (Ind-Ra) on Monday revised Vedanta Ltd's outlook to negative from stable while affirming its long-term issuer rating at AA.
Ind-Ra said it has factored in the debt of parent company Vedanta Resources Plc while arriving at the ratings.
The outlook revision reflects the expectation that Vedanta's credit metrics will remain weaker than expected levels in the near-term owing to the delay in volume ramp-up and fall in commodity prices.
As of September 2019, the parent debt amounted to 6.7 billion dollars and the buyer's credit was close to 1.2 billion dollars. Considering the revision in the agency's commodity price outlook in FY21, the net adjusted leverage will continue to be higher for the rating level.
The volume ramp-up is likely to be lower than expected in FY20 in the oil and gas and zinc international divisions. However, Ind-Ra expects Vedanta to achieve the targeted volume growth in FY21.
The oil division's volumes could potentially increase by 15 to 20 per cent year-on-year due to the addition of new wells and the availability of new surface facilities.
Zinc International's volumes will be supported by the ramp-up of the Gamsberg operations in South Africa while Zinc India's volumes could improve on account of higher mine output along with the possible debottlenecking of its smelting capacity in India.
However, the iron ore volumes in Karnataka might remain capped, considering that there was no increase in the same in 2019.
Meanwhile, the copper division's operations remain suspended following a stay on the National Green Tribunal's order that directed the state government to grant the company consent to operate. Furthermore, the ban on iron ore mining in Goa continues to be in place.
Vedanta Ltd, a subsidiary of Vedanta Resources Ltd, is one of the world's leading diversified natural resource companies with business operations in India, South Africa, Namibia and Australia. It is a leading producer of oil and gas, zinc, lead, silver, copper, iron ore, aluminium, steel and commercial power.
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