In early trade on Wednesday, Vedanta witnessed a decline of over 2% in its share price following a downgrade by Moody’s Investors Service on the rating of its senior unsecured bonds. Moody’s downgraded Vedanta Resources’ senior unsecured bonds rating to Ca from Caa3, prompting a 2.74% drop in Vedanta shares to ₹253.30 apiece on the BSE.
Moody’s also revised down the Corporate Family Rating (CFR) of Vedanta Resources to Caa3 from Caa2. Moody’s Senior Vice President Kaustubh Chaubal explained the rationale, stating, “We view the debt restructuring as default avoidance and assess that the creditors have incurred an economic loss with respect to the original promise. We consider the transaction to be a distressed exchange under our criteria, which underpins our downgrade of VRL’s ratings.”
Moody’s assessment of Vedanta’s ratings reflects concerns about its unsustainable capital structure characterized by high financial leverage at the holding company and persistent weak liquidity amid ongoing negative free cash flow.
Chaubal pointed out that even with the debt restructuring, Vedanta Resources Limited’s (VRL) near-term liquidity would only marginally improve, and the refinancing challenges would begin as it approaches the next bond maturity in April 2026.
Moreover, a springing covenant mandating holdco VRL to refinance its April 2026 bond maturity by December 2025, failing which all amended bonds would mature in April 2026, adds to the refinancing risk and increases the likelihood of further distressed exchanges, according to Chaubal.
Moody’s outlook on the company remains pessimistic, suggesting that Vedanta will likely encounter significant liquidity challenges over the next 24 months, and its default risk remains elevated.
Vedanta Resources, the UK-headquartered parent company of the Vedanta group, recently obtained bondholders’ approval to restructure four series of bonds. As of 9:20 am, Vedanta shares were trading 2.23% lower at ₹254.65 apiece on the BSE.
