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EconomyBusinessWill semiconductor business affect Vedanta Resources' credit profile?

Will semiconductor business affect Vedanta Resources’ credit profile?

Not as of now. Mining mogul Anil Agarwal-led Resources' credit profile will unlikely be weighed down by the group's planned Rs 1.54 lakh crore foray into semiconductor manufacturing, S&P Global Ratings said today. "This is because the company has reiterated that the $ 20 billion related investment will be carried out outside Vedanta Resources. The business will be undertaken in a separate entity under Vedanta Resources' holding company Volcan Investments Ltd," it said.

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 products – from cars to mobile phones and ATM cards.

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

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 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 of time.

"Our rating on Resources does not assume any material exposure by the company or its key subsidiary, Vedanta Ltd, to the semiconductor business over the next 12 to 24 months," S&P added.

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