20-Nov-2023
2 mins read
In recent developments, Vedanta, led by Anil Agarwal, has encountered a dual setback with a significant Goods and Services Tax (GST) notice and a downgrade by the esteemed credit rating agency CRISIL. Despite these challenges, Vedanta’s stock initially showed resilience, opening slightly higher during early trade.
GST Notice and Financial Impact
On November 18, Vedanta disclosed in a regulatory filing that it received a GST demand order amounting to Rs 1.38 crore, accompanied by applicable interest, from the GST & Central Excise Commissionerate, Rourkela. The company also acknowledged the potential imposition of a 10 percent penalty if the original demand is not met. Vedanta has chosen to appeal this order with the Appellate Authority under the GST Law, highlighting ongoing efforts to address the issue.
Stock Performance Amidst Challenges
Despite the GST notice and looming financial implications, Vedanta’s shares opened 0.5 percent higher on November 20. The stock was trading at Rs 240.45 at 9:50 am, indicating early market resilience in the face of regulatory challenges.
CRISIL Downgrades Vedanta’s Credit Rating
In a separate setback, CRISIL downgraded Vedanta’s long-term bank facilities and debt instruments from ‘CRISIL AA’ to ‘CRISIL AA-‘. Adding to the complexity, CRISIL placed these ratings on ‘Rating Watch with Developing Implications,’ shifting from the earlier ‘Rating Watch with Negative Implications.’ This credit rating adjustment signifies an increased level of uncertainty regarding Vedanta’s financial standing.
Company’s Response to Credit Rating Downgrade
Vedanta, in its regulatory filing on November 17, communicated the CRISIL downgrade. The company stated its commitment to navigate these challenges and disclosed its intention to file an appeal against the GST demand order. While the long-term ratings are downgraded, CRISIL reaffirmed the short-term debt instruments’ ratings at ‘CRISIL A1+’ and placed them on ‘Rating Watch with Developing Implications’ as well.
Strategic Shift with Demerger Plans
Looking beyond the immediate challenges, Vedanta had previously announced in September 2023 its strategic intention to undergo a demerger. This initiative aims to create independent verticals by separating the underlying companies, including metals, power, aluminium, and oil and gas businesses. The objective is to unlock potential value within each business segment.
In conclusion, Vedanta finds itself at a crucial juncture, managing both regulatory and financial challenges. The company’s decision to appeal the GST demand order and the ongoing demerger plans signify a proactive approach to navigate through these complexities. Investors and industry observers will keenly watch how Vedanta addresses these challenges and steers its strategic initiatives amidst the evolving financial landscape.