Vedanta’s debt-financed acquisition will increase leverage: Moody’s

Vedanta Resources’ proposed debt finance acquisition of Vedanta Limited, if successful, will provide the company better access to future cash surplus and cash of around $1.4 billion held at Vedanta Limited and Cairn India Holdings, rating agency Moody’s said in a report.

It added that notwithstanding long-term positives the debt-financed transaction will further weaken Vedanta’s credit metrics.

“Notwithstanding these long-term positives, the debt-financed transaction will further weaken Vedanta’s consolidated credit metrics, which are already stretched, and comes at a time of heightened macroeconomic uncertainty with disruptions caused by coronavirus pandemic and resource price declines dampening the company’s earnings and cash flow generation,” Moody’s said.

According to Moody’s, at the initial offer price of Rs 87.5 per share, Vedanta’s cash outflow for the 49.9 per cent shareholding in Vedanta Limited will add $2.2 billion in additional borrowing.

ET Energy World
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