Shares of Vedanta Ltd slipped over 4% today after Moody’s Investors Service downgraded tits holding company Vedanta Resources Limited’s (VRL) corporate family rating (CFR) to Caa1 from B3. Vedanta stock fell 4.54% to Rs 272.55 against the previous close of Rs 285.50 on BSE. Vedanta shares have lost 26.43 per cent in a year and fallen 9.8 per cent since the beginning of this year. Total 5.19 lakh shares of the firm changed hands amounting to a turnover of Rs 14.48 crore on BSE. Market cap of the firm fell to Rs 1.03 lakh crore.
Moody’s has downgraded the ratings to Caa2 from Caa1 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. The outlook on all ratings remains negative.
“The rating downgrades reflect the increasing refinancing risk surrounding holding company (holdco) VRL’s large debt maturities. Ongoing delays in holdco VRL’s refinancing efforts and its continued reliance on dividend receipts are depleting liquidity at its operating subsidiaries,” said Kaustubh Chaubal, a Moody’s Senior Vice President.
Holding company VRL’s cash needs for the fiscal year ending March 2024 (fiscal 2024) remain large and include: (1) cross-border bonds of USD400 million and USD500 million that are due in April and May 2023, respectively, and a USD 1.0 billion bond maturing in January 2024; (2) an estimated USD1.1 billion in term debt; (3) USD450 million of an intercompany loan; and (4) an estimated interest bill of at least USD600 million.
“We previously expected holdco VRL to find sufficient funds through loans and dividends to address its debt maturities until June 2023. However, VRL faces ongoing delays in obtaining funds relative to our earlier expectations amid a funding environment that remains challenging with high interest rates, scarce market liquidity and tight credit availability,” added Chaubal who is also Moody’s Lead Analyst for VRL.
“These issues expose the company to material refinancing risks and exacerbate the likelihood of a payment default or a distressed exchange.”
In terms of technicals, the relative strength index (RSI) of Vedanta stands at 40, signaling neither the stock is overbought nor oversold. The stock has a one-year beta of 1.4, indicating very high volatility during the period. Vedanta stock is trading lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.
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