Moody’s Investors Service has downgraded the rating of Vedanta Resources Ltd because of the elevated risk of debt restructuring over the next few months, as the firm has not made progress on refinancing its upcoming debt maturities.

Moody’s said it has downgraded to Caa2 from Caa1, the corporate family rating (CFR) of Vedanta Resources Limited (VRL). At the same time, Moody’s has maintained a negative outlook.

“The downgrade reflects the elevated risk of debt restructuring over the next few months because VRL has not made any meaningful progress on refinancing its upcoming debt maturities, in particular the $1 billion bonds maturing each in January 2024 and August 2024,” said Kaustubh Chaubal, a Moody’s senior vice-president and lead analyst on VRL.

VRL’s credit quality is constrained by its weak liquidity because of large refinancing needs and interest expenses amid tightening financing conditions in global capital markets, the agency noted.

“The company continues to face challenges in refinancing its debt, a reflection of reduced appetite from the lending community, and a key credit concern,” the rating agency said.

“VRL’s Caa category CFR reflects the company’s unsustainable capital structure, aggressive risk appetite and weak financial management.”

In August 2023, VRL sold a 4.3 per cent stake in key subsidiary Vedanta Limited for $500 million to stave off some of the pressure arising from the holding company’s imminent cash needs.

“Given that its entire shareholding in VDL and that VDL’s entire 64.9 per cent shareholding in Hindustan Zinc have already been pledged, this implies VRL has limited financial flexibility to raise financing,” Moody’s said.