Vedanta's Semiconductor Plant With Foxconn Won't Chip Away Liquidity: S&P
Volcan Investments, the holding company of Vedanta Resources, will be involved with Foxconn to set up the semiconductor plant in Gujarat.
The credit profile of Vedanta Resources Plc is unlikely to be weighed down by its planned Rs 1.54-lakh crore semiconductor plant in Gujarat, according to S&P Global Ratings.
"That's because the company has reiterated that the $20 billion-related investment will be carried out outside of Vedanta Resources," the US-based credit ratings agency said on Monday. "The business will be undertaken in a separate entity under Vedanta Resources' holding company Volcan Investments Ltd."
Vedanta and Taiwan's Foxconn Group have signed a pact with the Gujarat government to set a semiconductor plant in the state. Semiconductor chips, or microchips, are essential pieces of many digital consumer products -- from cars to mobile phones and credit/debit cards.
The Indian semiconductor market was valued at $27.2 billion in 2021 and is expected to grow at a compounded annual growth rate of nearly 19% to reach $64 billion in 2026. But none of these chips is manufactured in India.
According to S&P Global Ratings, 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 said.