Rating agency has analysed Vedanta’s financial profile based on proportionate debt and EBITDA
Fitch Ratings announced on Friday its downgrading of India-based Vedanta Resources Plc’s long-term issuer default rating to ‘BB’ from ‘BB+’.
Fitch said the outlook was stable and it had also downgraded Vedanta’s senior unsecured ratings to ‘BB-‘ from ‘BB’.
Having said so, it also stated the Anil Agarwal-promoted company had chosen to stop participating in the rating process. Hence, said Fitch, it would no longer have sufficient information to maintain the ratings and, therefore, would no longer provide ratings or analytical coverage for Vedanta. It said it had analysed Vedanta’s financial profile based on proportionate debt and operating earnings, to better reflect the fragmented shareholding of Vedanta in its subsidiaries. This fragmented holding restricts the level of Vedanta’s access to the large cash balances and future cash flows from its key operating subsidiaries — Cairn India (CIL), Hindustan Zinc (HZL) and Sesa Sterlite.
Most of Vedanta’s $9 billion of cash is at HZL ($4.3 bn) and CIL ($4 bn). With Vedanta’s effective holding of only 37.8 per cent and 34.3 per cent, respectively, at these entities, the effective cash available to Vedanta is likely to be only about a third of the total cash in the group, said Fitch.
While the cash available to Vedanta by way of dividends is limited, it does provide additional short-term liquidity to the group. The agency also factored in Vedanta’s ability to access cash from Sesa Sterlite without any leakages.
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