Vedanta split does not address debt

Vedanta Ltd’s move to split into six separate units is unlikely to address the mining conglomerate’s debt obligation, Fitch group firm CreditSights said, adding precarious debt situation at parent firm still remains unaddressed.

On September 29, Vedanta Ltd said its board has approved a major reorganisation, separating aluminum, oil and gas, power, steel and ferrous material and base metals into separate listed companies. “We do not believe that this reorganisation addresses Vedanta’s debt obligations,” CreditSights said in a note.

“The consolidated debt across all its proposed entities will still remain the same. We remain concerned that the precarious debt situation at Vedanta Resources is still unaddressed.” VRL, the parent firm of Vedanta Ltd, has been the financing vehicle for its debt obligations and servicing that debt remains critical. “We believe Vedanta could have resorted to selling down its stake in wholly-owned units such as Cairn India, aluminum in order to generate cash and to pay down debt, instead of this route.