Moody's downgrades Vedanta's credit outlook to negative

Global rating agency Moody's on Monday revised the credit outlook for Vedanta, the mining major, to "negative" from "stable" citing adverse impact of weak commodity prices as a major factor for the downward revision.

At present, Moody's has retained corporate family rating of Ba1 and affirmed its senior unsecured ratings of Ba3. 'Ba' generally refers to below-average creditworthiness compared to peers.

Moody's also said that Vedanta group's rating could face a downgrade due to many factors including depressed commodity prices.

"The outlook is negative reflecting the pressure on leverage arising from weak commodity prices and while measures to conserve cash may well be undertaken and aluminium and zinc output increase, the rate of decline in EBITDA (earnings before interest depreciation and amortisation) is likely to outpace reductions in debt," the global financial services major said.

According to Moody's, the outlook could be stabilised if commodity prices recover or on the back of successful volume increases in the Indian zinc, aluminium and iron ore businesses.

"If the company is successful in preserving cash flow during the downturn by cutting capex", that could also help Vedanta's credit outlook, the rating agency said.

Weak earnings from its oil and base metal businesses as a result of depressed commodity prices or material obstructions to production would put downward pressure on Vedanta's credit rating.

"The acquisition (if undertaken) of the Government of India's stake in Hindustan Zinc Ltd (HZL) fails to result in timely direct access to HZL's liquid assets," would also trigger possible downgrade.