Vedanta’s downgrade from ‘stable’ to ‘negative’ raises concern over firm’s capacity to manage KCM, Mopani mines —Haabazoka

An economist, Lubinda Haabazoka, says the downgrading of Vedanta Resources to negative from stable by S&P Global Ratings is a signal that the company may not be a good partner to take up the ownership of Konkola Copper Mine (KCM).

S&P Global Ratings last Thursday cut its outlook on Vedanta Resources, parent of Indian metals-to-oil conglomerate Vedanta Ltd (VDAN.NS), to “negative” from “stable,” citing increased funding risks.

The rating agency said the billionaire Anil Agarwal-owned company’s “weakened access” to cash flow from its operating units amid challenging external financing conditions raised its refinancing risk.

Commenting on this development, Haabazoka said it entailed that the company would have to borrow against its indebtedness to invest in KCM.

Haabazoka said in an interview with Zambia Monitor on Monday that downgrading of Anil Agarwal-owned company was a signal from independent rating agencies that the company was not having a good time.

“Current rating of Vedanta by S&P was purely depicting the financial health of the company, particularly its indebtedness and its ability to meet its obligations in terms of liquidity ratios.

“The rating depicts the financial health of the company. They look at the indebtedness, its ability to meet its obligations in terms of liquidity ratios and other assets. So downgrading of Vedanta is a signal that it might not be a good partner for KCM,” Haabazoka said.

He stated that the downgrading to negative from stable of Vedanta was a signal that its ability to meet its obligations had reduced and as such, for the company to ask for capital to pump into KCM, it would have to borrow at higher cost.

“If Vedanta is going to use debt capital to finance, it will have to borrow to invest into KCM because mining is always a capital-intensive industry,” Haabazoka said.

Haabazoka is Director of the University of Zambia Graduate School of Business and former President of the Economics Association of Zambia.

He holds a PhD in Economics from Rostov State Economics University obtained under joint GRZ/Russian government scholarship.

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