Vedanta’s other businesses to offset impact: Moody’s

The permanent closure of Vedanta’s Thoothukudi copper smelter will reduce the company’s scale and business diversity, adding pressure to its other businesses to maintain their strong performance and make up for decline in revenue, global ratings agency Moody’s Investors Service said.

However, Moody’s said it expects Vedanta’s other businesses - zinc, aluminium, oil and gas to deliver a solid performance in the fiscal year ending March 2019, boosted by strong commodity prices and higher production volumes. While shutdown of the smelter is “marginally credit negative,” it will have no immediate impact on Vedanta's ratings, the agency added in its latest report on 01 June.

On 29 May, Vedanta Resources announced that it received an order from the government of Tamil Nadu to close the company’s copper smelter plant in Thoothukudi with immediate effect. The project faced protests from the local population, which opposed the smelter’s expansion because of environmental concerns.

“We expect the company’s scale, as measured by revenue for fiscal 2018, to decline by 25% to $11.5 billion from $15.4 billion. Vedanta’s reported earnings before interest, tax, depreciation and amortisation (EBITDA) will decline by 5% to $3.85 billion from $4.1 billion proforma for fiscal 2018,” Moody’s said.

Vedanta's copper operations have generated low profitability compared to other business segments since its operational and financial performance depends upon the availability and price of copper concentrates used to produce end products such as copper bars, rods and wires. Vedanta's EBITDA margin, excluding the margin dilutive copper operations in India, was 33% in fiscal 2018 against 26% reported for the consolidated operations including it, the report said.