Moody's downgrades Vedanta Resources' CFR to B2 citing weak liquidity

The rating action also considers the impact of the company's governance practices on its credit profile, which Moody's regards as credit negative
Rating agency Moody's has downgraded the corporate family rating (CFR) of Vedanta Resources Limited (VRL) from “B1” to “B2” due to its persistently weak liquidity and high refinancing needs.

Moody's has revised the ratings on the VRL’s senior unsecured bonds from “B3” to “Caa1”. All ratings remain under review for further downgrade.

The downgrade primarily reflects holding company VRL's persistently weak liquidity and high refinancing needs amid growing signs of an aggressive risk appetite. This has implications for the company's financial strategy and risk management, said Kaustubh Chaubal, Vice President and Senior Credit Officer, Moody’s.

The rating action also considers the impact of the company's governance practices on its credit profile, which Moody's regards as credit negative.

Holding company VRL's liquidity has been severely challenged with $2.8 billion of its debt maturing from January 2021 through June 2022. This includes inter-company debt maturities of $507 million and a $325 million debt maturity at VRL's sole shareholder Volcan Investments, which Moody's expects to be serviced out of VRL group cash flows.


Further weakening the holding company's liquidity is an estimated $470 million of annual interest expense.

VRL's funding access had been underpinned by continued support from Indian and multinational banks not only at the operating entities, but also at various holding companies, Chaubal said.

However, VRL had to repay its $425 million debt maturity from one of its relationship banks, as opposed to rolling it over or refinancing it with other long-term debt, a sign of reduced bank support.

On November 20, VRL announced it had appointed a top-15 accountancy firm, MHA Maclntyre Hudson as its

statutory auditors for the fiscal year ending March 2021 following Ernst & Young's – the company's former statutory auditors -- decision not to be reappointed as auditors.

Ernst & Young were statutory auditors of VRL for the fiscal years 2017 through 2020 and had issued a qualified audit report for fiscal 2020.


Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel