PremiumMUMBAI: S&P Global Ratings on Tuesday said Vedanta Resources' ability to meet debt maturities till June next year is backed by strong operating performance of its subsidiary Vedanta Ltd.
"We forecast Vedanta will generate solid consolidated free operating cash flow of about US$2.5 billion 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" said S&P.
Vedanta Resources will use part of the proceeds of its $1.2 billion bond issued in February 2021 to meet its debt maturities of about $550 million (including intercompany loans) in the quarter ending June 2021.
"We expect the company to use a combination of refinancing at Vedanta Resources and dividends from Vedanta Ltd. to meet debt maturities (including intercompany loans) of about $1.4 billion between July 2021 and June 2022. That would leave $1 billion of bonds due July 2022 and about $900 million of loans due in the rest of fiscal 2023" the rating agency said.
Vedanta Resources will look to proactively refinance the July 2022 bond, as it did with the $670 million bond due June 2021. The current operating momentum and recent tightening in yields on the company's bonds are supportive of such issuance.
S&P expects Vedanta to maintain good liquidity given its free cash flows, despite potentially sizable dividend payments in fiscal 2022 as it reported consolidated cash of about $4.4 billion as of 31 March 2021, including $3 billion at its 65% subsidiary Hindustan Zinc Ltd.
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