Vedanta’s shares are poised for a decline on September 27 following Moody’s Investor Service’s downgrade of the company’s corporate family rating from Caa1 to Caa2. Over the past three months, Vedanta’s stock has witnessed a 24 percent drop, in contrast to the 5 percent rise in the benchmark Sensex. Recently, the stock touched a 52-week low of Rs 222 per share on September 22.
Furthermore, Moody’s also lowered the rating on senior unsecured bonds to Caa3 from Caa2, which were issued by Vedanta Resources Limited (VRL) and its wholly-owned subsidiary, Vedanta Resources Finance 11 Plc, and guaranteed by VRL. Concurrently, they have maintained a ‘negative’ outlook.
“The downgrade reflects 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,” stated the ratings agency.
As per Moody’s scale, Caa signifies obligations considered speculative with poor standing and are subject to very high credit risk, with the modifier ‘1’ indicating the higher end and ‘3’ indicating the lower end of the rating category.
On September 21, Vedanta’s board of directors approved a private placement of Rs 2,500 crore as non-convertible debentures (NCDs). The company clarified that this fund-raising was part of its routine refinancing carried out in the ordinary course of business.
Previously, in March, Crisil had downgraded its outlook from stable to negative due to concerns about the company’s potential for higher-than-expected financial leverage and reduced financial flexibility.
In a separate development, India Ratings also revised its outlook on Vedanta to negative, citing the increased risk of refinancing at a higher cost of borrowing.