In a swift turn of events, Vedanta‘s shares are witnessing a steep decline today, influenced by Moody’s Investor Service. Moody’s downgraded Anil Agarwal-led Vedanta’s rating from CAA1 to CAA2, causing the shares to plummet by over 6% on BSE intra-day, reaching a one-year low. Wondering what prompted Moody’s to cut its rating?
Moody’s Rating Downgrade for Vedanta: The Underlying Reasons
Moody’s downgraded Vedanta’s rating from CAA1 to CAA2, along with a similar downgrade for Vedanta Resources’ and its wholly-owned subsidiary Vedanta Resources Finance 11’s senior unsecured bonds from CAA2 to CAA3. The subsidiary’s bonds are guaranteed by Vedanta Resources. Besides, the outlook for Vedanta has also been kept negative by the rating agency. According to Moody’s, Vedanta Resources hasn’t taken substantial steps regarding the refinancing of debt due next year, increasing the risk of debt restructuring in January and August 2024 when $100 million – $100 million of debt matures.
Other Rating Agencies Join the Downgrade
Prior to this, in March, CRISIL had already revised Vedanta’s rating outlook from stable to negative due to concerns over the company’s lower financial flexibility and the likelihood of higher financial leverage beyond expectations. India Ratings had also revised its outlook to negative, citing increased risk due to rising costs of refinancing debt. Just last week, on September 21, the company’s Board of Directors approved a proposal to raise ₹2,500 crores through private placement of non-convertible debentures (NCDs). The company clarified that this fund-raising plan is part of its routine refinancing strategy.