Vedanta Ltd, the mining subsidiary of the UK-listed Vedanta Resources that recently completed its merger with Cairn India, will get an access to $4 billion of cash and another about $700 million a year from the merger, said S&P Global Ratings. The fund will allow Vedanta Ltd to repay its US$9 billion debt.
"In our view, the merger will improve the cash flow fungibility within Vedanta Ltd by simplifying the group structure to some extent. However, it will not change Vedanta Resources' financial metrics nor will it materially improve cash flow fungibility between Vedanta Ltd and the holding company Vedanta Resources," S&P said in a statement recently.
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"Vedanta Ltd would get access to about $4 billion of cash at Cairn India and its free operating cash flows, which we estimate to be about $700 million annually. This should support Vedanta Ltd's ability to service its debt of about $9 billion, including short-term debt, current maturities of long-term debt, and interest bearing payables of about $4 billion," the ratings agency said.
S&P said it awaits disclosure by Vedanta Resources regarding its plan to use Cairn India's cash that will go to Vedanta Ltd.
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"We expect Vedanta Resources to remain exposed to cash flow leakage, despite the merger. This is because minority shareholders will have a 49.9 per cent stake in Vedanta Ltd after the merger," the statement said.
The global metals and mining behemoth continues to ramp up its aluminium operations, which market watchers believe will play critical in improving the company's overall business diversity and operating efficiency in the long term.
The ramp up of its smelters at Jharsuguda and the Balco unit at Korba helped Vedanta to log 31 per cent growth in aluminium production in FY2016-17.
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