Vedanta plunges on downgrade of UK parent
Vedanta shares tumbled 6.9% in Wednesday's trading after rating firm Moody's downgraded the corporate family rating (CFR) of UK-based parent Vedanta Resources.
Analysts said concerns over the group's debt burden and volatile metal prices due to global headwinds could weigh down the stock in the near term.
The stock closed at ₹208.95 on the BSE on Wednesday, after hitting a 52-week low of ₹208.
«Vedanta Resources has been struggling to refinance its upcoming debt maturities worth $2 billion maturing during the next year,» said Jayesh Bhanushali, lead-research at IIFL.
«The downgrade along with the falling commodity prices have led to the corrections in Vedanta's stock price.»
Bhanushali said Vedanta is getting impacted by the parent's debt burden. Vedanta's Debt to EBITDA was 1.3 times in the March quarter which increased to 1.9 times in April-June, said Sneha Poddar, associate vice president-equity research at Motilal Oswal.
«The valuations are not comfortable at such high levels of debt,» she said.
Vedanta shares fell 25% in the past three months against the 4.7% up move in Nifty.
«The stock has had a negative outlook for a while with major concerns over its debt and headwinds in the metal market,» said Poddar.
«Since the metal sector is linked to global markets, the inflationary pressure due to global dynamics and low demand from the Chinese real estate sector has led to volatility in metal stock prices.»
Analysts expect a 7-9% cut in the earnings per share (EPS) of Vedanta. «The company has extended maturity on a $450 million loan to its parent company, VRL.
Further to this, the royalty charged by the parent company has increased from 2% to 3% since April 2023. This would result in a sharp cut in EPS.»
. Read more on economictimes.indiatimes.com
