On 27th May’20, the mining company, Vedanta Limited made public that credit rating agency, India Ratings and Research (Ind-Ra) has demoted the long term issuer rating of the company to IND AA- from the earlier rating of IND AA, revising its outlook from stable to negative.
The demotion contemplates likely slip in Vedanta's credit profile following a considerable fall in economic activity due to the lockdown imposed by COVID-19, with the balance sheet leverage remaining rose in FY21 and FY22.
The negative outlook reflects the risk of an additional spread of the epidemic and the resultant global demand shock, most likely leading to an extended subdued pricing environment. Further, it displays the growing risk of refinancing with material debt repayments soon becoming due at both, Vedanta and VRL in FY21 against the backdrop of general risk averseness in debt capital markets towards cyclical sectors.
Ind-Ra asserted to be pursuing to take a combined view of Vedanta and its subsidiaries and also factoring in the debt of the parent company, Vedanta Resources Plc. (VRL) while concluding the ratings. It is also of the belief that VRL's proposal to delist Vedanta would lead to an elevation in the balance sheet leverage in the short run but would also moderately credit positive for Vedanta in the medium-term, as it would reduce the group's structural subordination and improve their liquidity.
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