According to a bulletin released by S&P Global Ratings on Monday, Vedanta Resources Ltd has debt servicing obligations of approximately $3 billion, including interest and inter-company loans, in the current fiscal year. S&P predicted that the company will likely have sufficient liquidity until December 2023 and will need to secure at least $1 billion in funding for obligations that require funding until March 2024.

Vedanta Resources is the parent company of Vedanta Ltd, which declared a fifth interim dividend for the 2022-23 fiscal last month. The ratings agency estimated that Vedanta Ltd had consolidated cash of around $2.5 billion as of March 31, 2023, down from approximately $4 billion as of March 31, 2022, and will use $930 million of this to pay dividends in April.

S&P’s B- rating on Vedanta Resources with a stable outlook reflects its expectation that the company will secure additional funds to support liquidity beyond December 2023. The company is discussing multiple funding options with banks and investors for at least another $2 billion. Successful closure of some of these discussions will facilitate the payment of its $1 billion bond due January 2024. However, failure to demonstrate a credible refinancing plan at least six months before the bond maturity could lead to downside rating pressure.

S&P pointed out that Vedanta Resources’ funding initiatives are supported by its capacity to borrow at its subsidiary, Twin Star Holdings Ltd, which directly owns a 46% stake in the operating company, Vedanta Ltd. Vedanta Resources has been more successful in the past in raising debt at the Twin Star-level, given the structural seniority of Twin Star debt to Vedanta Resources debt.

However, S&P also noted that Vedanta Resources will become more dependent on external funding as cash at the company’s operating subsidiaries has declined, which has generally been a source of credit strength. The rating agency estimated that Vedanta Ltd had consolidated cash of about $2.5 billion as of March 31, 2023, down from around $4 billion as of March 31, 2022. The declining cash at operating subsidiaries may make it more difficult for Vedanta Resources to secure additional funding in the future.

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