Vedanta Resource's Credit To Weigh Down Over Gujarat Deal

The company signed with Gujarat to set up a semiconductor factory...

New Delhi: Ahead of the Vedanta Gujarat deal, S&P Global Ratings today said, Mining mogul Anil Agarwal-led Vedanta Resources' credit profile will unlikely be weighed down by the group's planned Rs 1.54 lakh crore foray into semiconductor manufacturing.

"This is because the company has reiterated that the USD 20 billion related investment will be carried out outside of Vedanta Resources. The business will be undertaken in a separate entity under Vedanta Resources' holding company Volcan Investments Ltd," it said.

According to the officials, Vedanta and its partner and Taiwanese electronics manufacturing giant Foxconn last week signed a pact with the Gujarat government for setting up a semiconductor factory in Gujarat.

Semiconductor chips, or microchips, are essential pieces of many digital consumer products - from cars to mobile phones and ATM cards.

The Indian semiconductor market was valued at $27.2 billion in 2021 and is predicted to grow at a compound annual growth rate (CAGR) of nearly 19 per cent to reach USD 64 billion in 2026. But none of these chips is manufactured in India so far.

Taking notes from the rating agency, said any potential credit impact of the planned investments in the semiconductor business will depend on the details of the funding plan, which have yet to emerge.

"We could watch out for any change in Vedanta Resources' dividend policy, to support servicing of any debt at Volcan for the semiconductor business," it said. "We believe Vedanta Resources will prudently manage its investments so that it does not put debt servicing at risk." The investments, it said, will also likely happen over a long period.