Vedanta's credit rating downgraded to IND AA- by Ind-Ra

On Wednesday, mining company, Vedanta Limited announced that credit rating agency, India Ratings and Research (Ind-Ra) has downgraded 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 reflects likely deterioration 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 raised in FY21 and FY22.

The negative outlook mirrors the risk of a further spread of the outbreak and the resultant global demand shock, most likely leading to an extended subdued pricing environment. Additionally, it reflects the increased 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 claims to be continuing to take a consolidated 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 be moderately credit positive for Vedanta in the medium-term, as it would reduce the group's structural subordination and improve their liquidity.

Vedanta Limited is a natural resource company engaged in the business of manufacturing copper and copper products as well as aluminium and aluminium products.

The stock was up by 1.54 per cent or Rs 1.35 per share, trading at Rs 89.20, at 11 am on Thursday. The 52-week high is recorded at Rs 179.95 and the 52-week low is Rs 60.30 on BSE.