S&P Global Ratings has revised the credit outlook of Vedanta Resources to negative from stable, even as it (through Twin Star Holdings) sold 15.40 crore shares of its subsidiary Vedanta for ₹3,983 crore to ease the debt burden.

According to NSE bulk deal data, Copthall Mauritius Investment and Societe Generale have picked up about 11.43 crore shares, while the identity of other buyers was not available immediately.

The sale price at ₹258 a share was at a discount of 5 per cent to previous closing of ₹272 on Wednesday.  Shares of debt-laden Vedanta were hammered down 7 per cent to close at ₹254 on Thursday.

Meanwhile, S&P has revised its outlook on Vedanta Resources to negative on the back of increased funding risks and affirmed ’B-’ rating, which indicates a relatively-higher credit risk. The negative outlook reflects the company’s tight liquidity due to its large debt maturities up until March 2025.

Funding risk

Vedanta Resources’ 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 and funding gap of $2 billion till August 2024.

The company also has interest expenses of $650 million. The $500 million that Vedanta Resources just raised by selling part of its stake in the 64 per cent-owned Vedanta, together with dividends and brand fees, should meet about half of the above debt-servicing needs.

Also read: Vedanta CFO says confident of meeting debt maturities in FY24

For the balance, Vedanta Resources will likely need to raise at least $600 million before its $1-billion bond matures in January, and the rest before next August. Vedanta Resources is now more exposed to funding risk given the significantly-reduced dividend capacity of Vedanta Ltd.

“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 global rating agency.

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