Rating agency S&P said that it does not see Vedanta Resources Ltd.’s (VRL) credit profile getting affected by the large investment in its semiconductor plant. The company has planned to invest $20bn in a semiconductor plant in the state of Gujarat via a joint venture with Taiwan’s Foxconn. S&P noted that VRL and its subsidiary Vedanta Ltd will not have exposure to the semiconductor business as the investment is to be made by Volcan Investment, a holding company of Vedanta Group. Moody’s also does not expect Volcan to extract any cash from Vedanta to fund this investment. S&P said that it will keep watch out for any changes to Vedanta’s dividend policy that supports the debt servicing at Volcan for the semiconductor business. It added that if VRL is used as a financing vehicle for Volcan, then it would weigh on its liquidity profile and pressurize its rating. VRL has committed to reduce its gross debt by $4bn over the next three financial years. Its total net debt stood at $8.8bn at the end-June. In 2021, India’s semiconductor market was valued at $27.2bn and is projected to grow at a 19% CAGR to $64bn by 2026.
VRL’s dollar bonds were trading higher with its 7.125% 2023s up over 0.9 points to 94.20 cents to the dollar, yielding 16.28%.
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