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Vedanta Ltd’s joint venture with Foxconn that was recently called off would be a “credit negative” for the Indian company’s UK parent Vedanta Resources, as per credit research firm CreditSights. They noted that the exit would “further strain” the credit metrics and free cash flows of both the subsidiary and the parent. They said that Foxconn’s exit essentially would imply the loss of a partner for Vedanta to split semiconductor chip manufacturing costs and that “a good portion of the project funding will come from” Vedanta itself. However, CreditSights added that the move will not immediately increase Vedanta’s funding needs as the semiconductor project is a long-term investment and that their 5-10Y timeline would spread out its capex.
Moreover, it continued to maintain its “buy” rating on Vedanta’s dollar bonds saying its refinancing outlook for some debt maturities have improved, helped by $1.3bn of fresh loan fundraisings. Further, $1.7b of short-term investments in bank deposits, bonds and mutual funds as of end-March could be liquidated if needed. This, coupled with pledging certain stakes in units and dividend inflows from subsidiaries could help Vedanta to successfully service debts due over the next year.
Vedanta’s dollar bonds were stable with its 9.25% 2026s at 65.53, after falling 6 points a day prior following the news of Foxconn’s exit and on reports of a possible exchange offer
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