Share price of Vedanta surged over 4% to day’s high at Rs 232 on NSE in Tuesday’s trading session. The price movement was accompanied by robust trading activity, with over 1.18 crore shares being traded at 9:30 AM.
Vedanta’s share price jumped after the company announced its plans to split its current operations into six separate publicly listed entities, with the goal of streamlining its corporate structure and enhancing the market values of its various business segments. On Friday, the shares of Vedanta closed 7% higher at Rs 225.55.
Last week on Thursday, Vedanta stock plummeted to its lowest point in the past 52 weeks, reaching Rs 208, following the corporate family rating downgrade by Moody's for the London-based promoter group and the prominent commodity entity, Vedanta Resources.
Moody's Investors Services has revised Vedanta Resources' rating downward from Caa1 to Caa2. This downgrade reflects heightened concerns regarding the company's forthcoming debt repayments, while the negative outlook is being retained.
Additionally, the rating agency has issued a cautionary note about the potential for further downgrades should the company encounter challenges in securing funding arrangements.
"While one could argue for a (theoretical) case of multiple expansion on peer-benchmarking, we cite risks of inter-group restructuring, carbon-heavy assets, cash flow burn in new ventures amongst others," analysts at Investec Capital in a note to their clients, was quoted as saying by The Economic Times. The brokerage firm retained its ‘sell’ rating for a target price of Rs 180 per share.
"As this demerger does not improve Vedanta's credit profile, the situation remains the same for Vedanta Resources - to refinance the debt. Vedanta's cash flows are not sufficient to upstream the dividend to Vedanta Resources unless it assumes debt on its books," Ashish Kejriwal of Nuvama Institutional Equities said.