Vedanta Resources Ltd.

Vedanta Ltd. has US$1.7 billion of debt maturities in fiscal 2022. We do not consider this a big risk given proximity to cash flow for lenders at the operating level and Vedanta Ltd.'s improving operational performance. The failed privatization is positive for Vedanta Resources' consolidated leverage, with about US$3.5 billion less debt. However, it significantly narrows the company's funding options. We now see leverage declining steadily, with our adjusted debt-to-EBITDA ratio falling to 4.25x-4.5x by March 2021 and further to 3.5x-3.75x by March 2022, from 5x as of March 31, 2020. Although such declines would normally support a higher rating, they are overshadowed by the weak liquidity position of the holding company. The negative outlook reflects Vedanta Resources' tight liquidity

...The failed privatization of Vedanta Ltd. has narrowed Vedanta Resources' refinancing options. An inefficient corporate structure remains Vedanta Resources' key credit weakness and a rating driver. The company's failure to privatize its 50.1%-owned subsidiary Vedanta Ltd. in October 2020 has raised refinancing risk, given large debt maturities due, especially in 2022. The failed privatization has also interrupted the positive momentum underpinning the Vedanta Resources credit story, and fundraising has become more challenging following the sell-off in bonds. Vedanta Resources has liquidity to meet its immediate debt maturities, given its access to cash at the subsidiary level. However, we view this as unsustainable beyond a year because it would materially reduce the company's consolidated cash. Improving funding access at Vedanta Resources--the holding company--is therefore critical. The rating on Vedanta Resources assumes the company will pursue options to make its corporate structure...

Full Report