Shares of Vedanta rose nearly 2% in intraday trade on Thursday, recovering from its 52-week low touched in the previous session, amid a report that billionaire Anil Agarwal-led metal and mining firm mulls potential demerger of its businesses into separate listed entities.

The mining heavyweight touched its 52-week low of ₹208 on Wednesday after Moody’s Investor Services downgraded Vedanta Resources’ corporate family rating, citing slow progress on refinancing of its upcoming debt maturities, in particular the $1 billion bonds maturing each in January 2024 and August 2024. The London Stock Exchange (LSE)-listed Vedanta Resources is the parent company of Vedanta.

Vedanta has reportedly informed its lenders that it plans to restructure its businesses such as aluminum, iron & steel, and oil & gas into separate listed entities, which could help its parent company manage its debt load. The restructuring plans are ongoing and no final decisions or timing of the demerger has been made so far, according to a global news agency.

Reacting to the news, Vedanta shares gained nearly 2% to hit an intraday high of ₹213.05 on the BSE, while the market capitalisation rose to ₹78,042 crore. In the previous session, the largecap stock ended 6.7% lower at ₹208.95 after hitting its 52-week low of ₹208 in intraday trade. The stock touched its 52-week high of ₹340.75 on January 20, 2023.

The mining heavyweight has remained under selling pressure in the recent past amid a slew of negative developments such as the withdrawal of Taiwan's Foxconn from a $19.5 billion semiconductor joint venture. The renewed concerns about piling debt of its London-based parent, Vedanta Resources, which has to repay term debt worth $4.2 billion in the FY24, also dented sentiments. 

The rating downgrade of Vedanta Resources by Moody’s has further dented sentiments. The global ratings agency has downgraded to ‘Caa2’ from ‘Caa1’ the corporate family rating (CFR) of Vedanta Resources Limited (VRL). It has also downgraded to ‘Caa3’ from ‘Caa2’ its rating on the senior unsecured bonds issued by VRL and those issued by VRL's wholly owned subsidiary, Vedanta Resources Finance II Plc, and guaranteed by VRL.

At the same time, it has maintained the negative outlooks, citing persistently weak liquidity profile and concerns over the company's ability to address the imminent cash needs, especially at the Holdco.

"The downgrade reflects elevated risk of debt restructuring over the next few months because VRL has not made any meaningful progress on refinancing its upcoming debt maturities, in particular the $1 billion bonds maturing each in January 2024 and August 2024," says Kaustubh Chaubal, a Moody's Senior Vice President and lead analyst on VRL.    

The agency also warned that it could downgrade VRL's ratings further if the company fails to make progress on funding arrangements to service its debt such that the risk of default increases materially higher than indicated by the current ratings.

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