Moody's has lowed Vedanta Resources Plc's bond rating to Ba3 from Ba2 while retaining the corporate family rating at Ba1 on the back of concern over high debt post acquisition of controlling stake in Cairn India. The outlook on both ratings is maintained at negative.

Moody's said that while the acquisition of Cairn India should enhance the Group's EBITDA, Vedanta drew USD 2.78 billion from its pre arranged acquisition facilities. Coupled with the issue of USD 1.65 billion of bonds in June 2011, the debt level is now in excess of USD 9 billion.

Mr Alan Greene vice president (senior credit officer) of Moody's said that “Sporadic efforts have been made to offset the lack of parent company profits and to move cash to the parent level but the ability to declare regular dividends from the operations, chiefly in India, and to upstream these via the intermediate holding companies, is not well established.”

The impact of the depreciating rupee has been seen with earnings attributable to equity holders of Vedanta falling to USD 28 million in the six months to September 2011, largely as a result of net mark to market losses on financing arrangements at the Indian subsidiaries.

(Sourced from BL)