India Ratings and Research has downgraded the credit ratings of Vedanta Ltd. The rating went from IND AA to IND AA-.
"India Ratings and Research has placed these ratings on Rating Watch with negative implications while reaffirming the ratings on the short-term debt instruments of the company at IND A1+ and placing these ratings also on rating watch with negative implications," Vedanta informed of the downgrade in a regulatory stock filing.
Vedanta, a subsidiary of Vedanta Resources Ltd, is one of the world's leading natural resources companies. It is headquartered in Mumbai, Maharashtra and has its main operations in iron ore, gold and aluminium mines.
This downgrading action covers proposed and existing Non-Convertible Debentures (NCDs), project finance facilities, Commercial Paper, and term loans.
"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," the India Ratings' analysts wrote.
Due to corrections in the commodity cycle and the higher cost of borrowing for the most recent bond issuance, India Ratings attributed the downgrades to lower-than-expected cash accruals at Vedanta. This could affect the company's liquidity cover as well as its capacity to support its subsidiary Vedanta Resources Ltd.
Vedanta is anticipated by India Ratings to complete the refinancing over the following two months.
However, it cautioned that further negative rating action may be necessary if the refinancing process is delayed or the terms are damaging to the company's liquidity and financial flexibility.