InvestorQ : Why are there so much of concerns over Vedanta bonds in the market? I thought the company is still fundamentally quite sound?
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Why are there so much of concerns over Vedanta bonds in the market? I thought the company is still fundamentally quite sound?

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7 months ago
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With all the concerns over bond markets, you cannot really blame bond buyers for panicking over Vedanta debt paper. In fact, weakness in outlook for commodity sector and fears due to metals producer Vedanta’s balance sheet fragility has spooked investors in Vedanta’s debt paper. Vedanta’s one-year corporate bond yields have shot up from 6.628% in November 2019 to a shopping 60.296% April end. The worry is also about exposure because Indian mutual funds hold over Rs.16,000 crore of corporate bonds in Vedanta under different schemes. The sharp rise in yields denotes panic selling by many mutual funds even at ridiculous yields. However, if the issuer pays back the principal and interest on time, the loss gets erased and this is only the panic in the markets that is causing this. World Bank has already predicted a prolonged slump in the global commodity markets and the COVID-19 shutdown has only made things worse. There is also concern over Vedanta’s ability to refinance $1.9 billion of debt securities maturing in September 2021. Large banks have been bearish on the Vedanta group for quite some time now.

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