S&P Global Ratings has said Vedanta Resources' increased ownership in Vedanta Ltd will support the company's ability to meet its debt maturities over the next 12 to 18 months.
Vedanta Resources has announced an open offer to acquire an additional 10 per cent stake in its 55 per cent owned subsidiary Vedanta Ltd.
"We anticipate the transaction which should conclude by March will strengthen the corporate structure of Vedanta Resources -- the holding company -- and improve its access to subsidiary-level cash and cash flow," said S&P.
"The open offer also reiterates Vedanta Resources' commitment to improve its capital structure which we see as positive for the company's refinancing initiatives."
Strong operating momentum and sizable free cash flow generation at Vedanta Ltd also improve liquidity at the holding company level.
S&P estimated that free cash flow at Vedanta Ltd (including Hindustan Zinc Ltd) will be 1.6 billion to 1.8 billion dollars over the 12 months to March 31, 2022.
This together with 4.8 billion dollars of cash available at Hindustan Zinc and Vedanta Ltd as of September 2020 gives Vedanta Resources greater flexibility to utilise dividend payments for debt servicing if needed, thanks to reduced dividend leakage after the open offer.
Additional debt incurred for the open offer will likely be offset by the benefits of a more efficient corporate structure.
Based on the floor price, Vedanta Resources will incur an additional 800 million dollars in debt to fund the acquisition of a 10 per cent stake in Vedanta Ltd. This debt is in addition to the 400 million dollars raised for the earlier increase in stake to about 55 per cent from 50.1 per cent.
S&P said refinancing risk at Vedanta Resources has significantly reduced over the next 12 to 18 months.
( With inputs from ANI )
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