S&P Global Ratings said on Tuesday Vedanta Resources Ltd's ability to meet debt maturities until at least June 2022 has strengthened because of the likely strong operating performance of its subsidiary Vedanta Ltd.
"We forecast Vedanta Ltd will generate solid consolidated free operating cash flow of 2.5 billion dollars in fiscal 2022 (year ending March 2022) based on the company's operational and capital expenditure guidance."
Strong commodity prices should support Vedanta Ltd's robust performance, enhancing its ability to pay dividends to Vedanta Resources and help the parent's refinancing, it said.
Vedanta Resources will use part of the proceeds of its 1.2 billion dollar bond issued in February to meet its debt maturities of 550 million dollars (including inter-company loans) in the quarter ending June 2021.
S&P expects the company to use a combination of refinancing at Vedanta Resources and dividends from Vedanta Ltd to meet debt maturities (including inter-company loans) of 1.4 billion dollars between July 2021 and June 2022.
That will leave 1 billion dollars of bonds due July 2022 and about 900 million dollars of loans due in the rest of fiscal 2023.
S&P said Vedanta Resources will look to proactively refinance the July 2022 bond as it did with the 670 million dollar bond due June 2021. The current operating momentum and recent tightening in yields on the company's bonds are supportive of such issuance.
In addition, S&P expects Vedanta Ltd to maintain good liquidity given its free cash flows despite potentially sizable dividend payments in fiscal 2022.
The company reported consolidated cash of 4.4 billion dollars as of March 31, including 3 billion dollars at its 65 per cent subsidiary Hindustan Zinc Ltd.
( With inputs from ANI )
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