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Business News/ Companies / News/  S&P downgrades Vedanta, Indian arm's stock nosedives after promoter pares stake
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S&P downgrades Vedanta, Indian arm's stock nosedives after promoter pares stake

Shares of Vedanta Ltd, led by Anil Agarwal, dropped 9% in intraday trading after S&P downgraded the credit outlook of Vedanta Resources due to increased funding risks

In a statement put out in Singapore, S&P Global Ratings downgraded Vedanta Resources citing increased funding risks (Adeel Halim/Bloomberg News)Premium
In a statement put out in Singapore, S&P Global Ratings downgraded Vedanta Resources citing increased funding risks (Adeel Halim/Bloomberg News)

Mumbai: Billionaire Anil Agarwal-led Vedanta Ltd’s shares plunged 9% in intraday trade to 247.60 apiece on exchanges on Thursday after S&P Global Ratings downgraded the parent firm Vedanta Resources Ltd’s credit outlook from stable to negative on Thursday when Twin Star Holdings Ltd., promoter of Vedanta, sold 15.4 crore shares in the company worth 3,983.1 crore to raise funds for repaying dues.

Marquee investors including Societe Generale and Copthall Mauritius Investment Ltd bought 2.94 crore and 8.48 crore Vedanta shares from Twin Star at 258.5 apiece respectively. 

Shares of Vedanta Ltd ended 6.65% down at 254.05 apiece on NSE, which is 1.72% lower than the floor price at which Societe Generale and Copthall Mauritius Investment purchased the shares from Twin Star.

In a statement put out in Singapore, S&P Global Ratings downgraded Vedanta Resources citing increased funding risks.

The rating agency has affirmed 'B-' long-term issuer credit rating for the London-based parent firm.

This rating indicates a “relatively higher credit risk", said S&P Global, while affirming its 'B-' long-term issue rating for the senior unsecured debts of Vedanta Resources.

“Vedanta Resources Ltd.'s weakened access to cash flow from its operating subsidiaries at a time of challenging external financing conditions has raised its refinancing risk. The company has about $3 billion of debt due between now and August 2024," said S&P.

The agency said that the negative outlook reflects the company's tight liquidity due to its large debt maturities up until March 2025.

“Vedanta Resources is making refinancing progress, but execution risks remain," said the S&P release.

“We understand that the company is in discussions to raise further funds in excess of $1 billion. We see material risks, given a challenging funding environment and the absence of traditional funding sources such as capital markets. This is the basis for the negative rating outlook on Vedanta Resources," said the agency.

Even though Twin Star Holdings has sold only a part of its 46.4% promoter holding in Vedanta, the rating amid a weak broader market pushed Vedanta’s stock below the floor price that was offered by Twin Star Holdings in Thursday’s bulk deal.

Vedanta Resources is pushing to slash its debt, which stood at $6.5 billion as of May 2023. The UK company has been relying heavily on dividends from its Indian subsidiaries, raising concern among investors about depleting reserves at its units.

Vedanta Resources’ debt ballooned to $16 billion as of March 2022, after which it embarked on a drive to become a zero-debt company in two-three years.

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Published: 03 Aug 2023, 08:13 PM IST
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