Moody’s upgrades Vedanta’s rating to Ba3
Moody’s Investors Service upgraded Vedanta Resources’ corporate family rating to Ba3 from B1. It has also upgraded the company’s senior unsecured bond rating to B2 from B3 while marking the outlook ‘stable’.
“The upgrade of Vedanta’s ratings reflects our view that the relatively benign operating environment and stabilising commodity prices will aid in enhancing the company’s Ebitda and cash flow generation,” senior Moody’s analyst Kaustubh Chaubal said.
While improved sales volume led by higher production levels is expected to pave the way for earnings and cash flow expansion, Vedanta’s annual capital expenditure aggregating $1.2-1.5 billion and dividend payments are likely to restrict cash flow generation, Moody’s said.
The upgrade also reflects Vedanta’s effort to cut absolute debt levels following the merger of its subsidiary Vedanta with the group’s oil and gas subsidiary, Cairn India. “The company has reduced about 17% of its gross debt,” Chaubal said. The ratings firm also factored in Vedanta’s diversified presence in copper, zinc, aluminium, iron ore, oil and gas, and power businesses across multiple geographies in the upgrade.
Vedanta’s unsecured bond issuances in January and August this year — each totalling $1 billion — and a $840-million term loan for refinancing are proactive steps towards refinancing its debt maturities and lengthening the age profile of its debt, Moody’s said. The current operating environment and the company’s track record in turning around its operations will help in Vedanta’s ability to refinance term debt.