S&P assigns negative outlook to Vedanta Resources

KOLKATA: Global rating agency Standard & Poor's on Monday set a negative outlook on UK-based Vedanta Resources Plc promoted by Indian-born businessman Anil Agarwal, attributing the forecast to weak prices and risks associated with the company's metals business.

S&P has also affirmed its 'BB' long-term foreign currency corporate credit rating on the oil and metals mining major, saying Vedanta's oil business will ensure profitability over the next 12 months. "We affirmed the rating on Vedanta to reflect our expectation that the company's oil subsidiary, Cairn India Ltd, will continue to perform strongly over the next 12 months because of favourable oil prices," said S&P's credit analyst Vishal Kulkarni.

"Cairn's contribution should offset the likely subdued cash flow generation at Vedanta's other entities due to weak metal prices and operating risks," it said. The rating on Vedanta reflects the company's exposure to commodity prices, and operating risks in India, S&P added. Production at Cairn is in line with our expectations. We believe Cairn will continue to provide about a third of Vedanta's consolidated EBITDA in fiscals 2013 and 2014 (ending March). "Country and operational risks in Vedanta's metals and mining businesses in India have yet to subside," said Kulkarni.

The rating agency has also affirmed the 'BB' issue rating on the company's senior unsecured notes and senior unsecured notes issued by Vedanta's wholly-owned subsidiaries and guaranteed by the company.