Tuesday, October 4News That Matters

Vedanta Resources Semiconductor plans won’t cheap away at Liquidity:S&P

The proposed Rs 1.54 lakh crore foray into chip manufacturing by the group helmed by mining magnate Anil Agarwal’s Vedanta Resources won’t likely have a negative impact on the company’s credit profile, according to S&P Global Ratings on Monday. “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 stated. A deal for the construction of a semiconductor factory in Gujarat was signed last week by Vedanta and its partner, the enormous Taiwanese electronics manufacturer Foxconn. Automobiles, mobile phones, ATM cards, and other digital consumer goods all depend on semiconductor chips, sometimes known as microchips.

Vedanta Resources

The Indian semiconductor industry, which was valued at USD 27.2 billion in 2021, is anticipated to expand at a CAGR of around 19% to reach USD 64 billion in 2026. But up until now, none of these chips had been produced in India.

The rating agency stated that the specifics of the funding plan, which have not yet been revealed, will determine any potential credit impact of the planned investments in the semiconductor industry. It warned that if Vedanta Resources’ dividend policy changed, it would be necessary to support the servicing of any debt owed to Volcan for the semiconductor industry.

“We think Vedanta Resources will manage its investments wisely so as not to jeopardise debt servicing,” The investments, it added, are also probably going to take a while to complete. In the following 12 to 24 months, “Our rating on Vedanta Resources does not assume any major exposure by the firm or its key subsidiary, Vedanta Ltd,” according to S&P.

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