“This is because the company has reiterated that the USD 20 billion related investment will be carried out outside of Vedanta Resources. The business will be undertaken in a separate entity under Vedanta Resources’ holding company Volcan Investments Ltd,” it said.
Vedanta 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.
The Indian semiconductor market was valued at USD 27.2 billion in 2021 and is expected to grow at a compound annual growth rate (CAGR) of nearly 19 per cent to reach USD 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 Vedanta 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 Vedanta Resources does not assume any material exposure by the company or its key subsidiary, Vedanta Ltd, to the semiconductor business over next 12-24 months,” S&P added. PTI