Mumbai: Moody’s Investors Service has placed the Baa3 corporate family rating and the Ba1 long-term senior unsecured rating of Vedanta Resources plc (Vedanta) on review for possible downgrade.
The review follows the company’s announcement that it would more than double its aluminium capacity with an overall cost of $9.8 billion.
“The rating action reflects Moody’s concern that such capital investment would weaken Vedanta within its ratings depending on the additional debt to be raised, combined with material project execution risks” says Ivan Palacios, a Moody’s AVP/Analyst.
The rating agency also notes Vedanta’s additional capital requirement in relation to the recently-announced acquisition of Asarco, the planned buy-out of minority stakes in Hindustan Zinc Ltd and Balco, and the construction of substantial power generation capacity.
Accordingly, total capital investment requirement over the next 4 years is pegged at around $18 billion.
Vedanta also announced a plan to simplify its corporate structure which will see the company increase its direct shareholding in Sterlite Industries Ltd from 57% to 73%.
Moody’s sees the simplification of the corporate structure as a positive step, albeit it remains relatively complex, as Vedanta will not fully own all of its operating subsidiaries.