CreditSights welcomes Vedanta losing Jaiprakash bid

New Delhi, Nov 21 (PTI) Mining conglomerate Vedanta losing the race to acquire distressed infrastructure firm Jaiprakash Associates (JPA) is credit positive as it removes the risk of the company absorbing the JPA's heavy debt and volatile real-estate and infrastructure operations, CreditSights said Friday.

"We welcome the failed JPA acquisition that we viewed as a credit negative for Vedanta Ltd (i.e. this restores the status quo for the company), but remain wary of Vedanta and (its parent) Vedanta Resources Ltd's increasingly aggressive expansion appetite," the Fitch group company said in a note.

JPA's creditors earlier this week voted in favour of rival bidder Adani Enterprises, mainly as it proposed higher upfront payments over a 1.5-2 years timeframe.

"We expect Vedanta to yield and not contest the bid outcome," CreditSight said.

It remains concerned over Vedanta Group's aggressive expansion in newer, capital-intensive ventures such as semiconductors and hydropower.

Stating that it maintains its Market perform recommendation on Vedanta Resources (VRL), CreditSights said the firm continues to be on a solid footing for at least the next 1-1.5 years, with low near-term debt refinancing and default risks.

Other positives include dividend upstreaming, brand fee income, and a couple of equity fundraisings last year at the zinc subsidiary Hindustan Zinc Ltd and Vedanta Ltd that aided deleveraging and plugging of funding gaps till FY26-FY27.

VRL has pledged to reduce its standalone gross debt to USD 3 billion by FY27.

"The prospect of equity stake sales after the proposed VEDL demerger could act as a modest positive catalyst, though recent roadblocks have cast doubt (notably the Indian central government's objection to the demerger)," it said. "That said, we acknowledge that VRL's still-high (albeit lower) interest costs and persisting aggressive capex could limit further meaningful improvements in its credit profile.

VRL is also exposed to other downside risk including negative headlines, as witnessed from US short seller Viceroy's damning reports, that could induce some bond price volatility.

JPA's creditors unanimously voted in favour of the resolution plan submitted by rival bidder Adani Enterprises, mainly as it proposed higher upfront payments over a 1.5-2 year timeframe. As the next step, the committee of creditors will likely forward the creditors's decision to NCLT.

Vedanta, it said, had emerged the highest bidder to acquire JPA under the corporate insolvency resolution route (IBC) in early September 2025. Of Vedanta's Rs 17,000 crore bid price, Rs 4,000 crore was to be paid upfront, with the remaining Rs 13,000 crore paid over the next 5-6 years. Adani Enterprises was the main rival in the final bidding round, with 3 other rivals who exited earlier including Jindal Steel & Power, Dalmia Bharat and PNC Infratech.

"We expect VEDL to yield and not contest the bid outcome. Technically, VEDL could contest the bid decision in court as Adani Enterprises won despite not offering the highest bid. That said, Indian courts seem to usually rule in favour of lenders' commercial wisdom in precedent IBC cases," it said.

CreditSight said it "welcome(s) the failed JPA acquisition that we viewed as a credit negative for Vedanta. This restores the status quo for Vedanta.

Key credit negatives of the deal included worsening of Vedanta's credit profile given JPA's heavy debt stack and deteriorating earnings as well as exposing the company to the more volatile and working capital intensive real estate, cement, and infrastructure segments. It also exposed Vedanta to execution risk, given its limited operational track record in the above fields, thus limiting prospects of a turnaround. Also, there was "murky strategic rationale for the acquisition," it said.

"That said, we remain wary of Vedanta and VRL's increasingly aggressive expansion appetite - a key risk we have regularly highlighted. A higher capex at Vedanta, including in new ventures such as chip manufacturing and hydro power generation, could restrain improvements in its free cash flows, limit its dividends paid to parent VRL, and put into question VRL's goal of reducing gross debt to USD 3 billion by end-FY27," it added. PTI ANZ MR