Shares of Vedanta opened under pressure on October 12, reacting negatively to India Ratings and Research downgrade of its long-term issuer rating to 'IND AA-' from 'IND AA'. The rating agency has attributed the downgrade to heightened liquidity risk and diminished financial flexibility resulting from a delay in securing refinancing.
In the previous session, Vedanta shares ended 2.2 percent higher at Rs 227.20 on the NSE.
"The downgrade reflects Vedanta's increased liquidity risk and reduced financial flexibility on account of delays in tying up the refinancing for managing its large upcoming bond maturities in January 2024 and financial year 2024, which could potentially impact the company's liquidity and financial flexibility in the interim," India Ratings analysts said.
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The downgrade results from Vedanta's lower-than-expected cash accruals due to shifts in the commodity cycle and increased borrowing costs for recent bond issuances. These factors may impact the company's liquidity and its ability to support Vedanta Resources, as indicated by India Ratings analysts.
CRISIL Ratings recently placed the long-term bank facilities and debt instruments of Vedanta Limited under 'rating watch with negative implications'. Moody's Investors Service has also downgraded Vedanta Resources' corporate family rating (CFR) from Caa1 to Caa2 over elevated risks of debt restructuring over the next few months. With the current downgrade, the outlook remains negative for Vedanta's parent company , as per the global ratings agency.
The recent downgrade comes just after Anil Agrawal-led Vedanta took its first step towards its proposed demerger by incorporating its base metal subsidiary Vedanta Base Metals, of which Vedanta will currently own 100 percent. Vedanta's ratings have been placed on 'Rating Watch with Negative Implications' by India Ratings in view of this proposed demerger into six standalone listed entities over the next 1 - 1.5 years.
Also Read | India Ratings downgrades rating on Vedanta's debt instruments
Vedanta share price has tumbled 28 percent so far in 2023, underperforming the Nifty 50 which has risen over 8 percent during this period.
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