Deutsche Bank, which rates the stock a buy, said that the question of whether Vedanta Resources will breach its covenants is key for investors but these risks are already priced into the share price.

Mr Grant Sporre analyst at Deutsche Bank said in a note that the key issue is whether the group's subsidiaries can service the parent level debt. But he added that he estimated that commodity prices would need to fall by another 15% and stay at these levels for full year 2013 before the group was likely to breach the covenants.

He said that "Much of this risk is priced in already in our view."

Vedanta has wide ranging interests in aluminum, copper, zinc, lead, iron ore and its main operations are in India, Zambia and Australia.

Mr Sporre goes on to say that the cash cows in the group's portfolio are Cairn India (once the acquisition of the controlling stake is approved), HZL and Konkola.

He said that "Sesa Goa also generates spare cash, but is likely to hoard for its West African iron ore project. These cash cows can supply sufficient dividends to meet the interest payments of the cash hungry aluminum and power divisions, as well as meeting the substantial 700 to 800 million annual interest charge at the parent level, under our base case commodity assumptions."

Deutsche Bank said that downside risks for the shares include lower than expected commodity prices, and further delays in approvals for the company’s growth projects, and the final approval of the Cairn India acquisition.

(Sourced from www.proactiveinvestors.co.uk)