Vedanta is being forced to pay high yields to refinance debt
Vedanta is issuing high yield bonds to repay debt maturing in 2021, indicating that the company does not have funds generated internally to service its short-term debt. This is very negative for the credit as if the company is not able to start generating funds to service debt, the high-interest cost for such new debt can prove to be a huge credit negative factor.
A Brief about Vedanta Ltd.
Vedanta Limited (VL) is a diversified company into natural resources like zinc, oil and gas, copper, aluminum, iron ore, and power. Vedanta Resource Limited (VRL) holds 50.1% equity stakes in VL. Its operations include copper, iron ore, aluminum assets at Jharsuguda, and Lanjigarh in Odisha and power divisions. The company runs its aluminum operations through its subsidiary, Balco. Also, a part of the power business is conducted through a wholly-owned subsidiary, TSPL. The oil and gas business has been merged with Vedanta, and the group operates the zinc business through HZL and Zinc International in South Africa and Namibia.
VL credit rating is CRISIL long term rating of AA (Negative), short term rating A1+ while India Rating long term AA-(negative), and short-term rating of A1+.
