Crisil downgrades outlook for Vedanta citing dividend outflows

Mumbai: Crisil Ratings on Wednesday downgraded the outlook for Vedanta to 'negative' from 'stable' earlier as higher cash outflow from the company in the form of dividends is seen to negatively impact the financial leverage and flexibility of the resources conglomerate.
Vedanta on Tuesday announced an interim dividend of ₹20.50 per share - its fifth for the year. With this, the company's total outflow on account of dividends this year will be ₹37,733 crore. Including dividends from subsidiary Hindustan Zinc, Vedanta's dividend payout for the year will be more than ₹40,000 crore.

The ratings agency has also expressed concerns on how Vedanta's parent Vedanta Resources will be more dependent on the company for dividend payouts if it is unable to refinance its debt obligations.

The dividends are aimed at helping parent Vedanta Resources, which has to repay debt worth $3 billion each in 2023-24 (April-March) and 2024-25. Vedanta Resources, in fact, has maturities worth $1.7 billion in the first quarter of FY24 itself. While Vedanta Resources has been in discussions for refinancing this upcoming debt, the progress on these discussions has been slower than expected, Crisil said.


A credible refinancing or repayment plan for debt obligations in the second half of FY24 will be a key monitorable for Vedanta Resources, as it faces significant refinancing risk till FY25, the rating agency said. Vedanta Resources is rated 'B-/Stable' by Crisil.

"In case of any further delay in the expected refinancing plan, dependence on dividend payouts by Vedanta Limited will increase; Vedanta Limited has cash balances only to cover for VRL's maturities for the first half of fiscal 2024, and hence will be a key rating sensitivity factor," it said in a report on Wednesday.

With the payouts, Vedanta's cash balance is seen reducing to less than ₹20,000 crore as on March 2023, as compared with more than ₹30,000 crore as on March 2022, Crisil said.

Its consolidated earnings before interest, taxes, depreciation and amortisation (Ebitda) is seen at around ₹35,000 crore, down from the earlier estimate of ₹38,000-40,000 crore.