Ratings agency Moody’s has lowered its outlook for Vedanta Resources, after a subsidiary paid $200m (£153m) for a stake in Anglo American.
Shares plunged by nearly 18 per cent on Friday to 162.15 rupees after Vedanta announced the move, their lowest since 2016.
The Indian miner said its foreign subsidiary Cairn India bought the stake from parent company Volcan Investments as part of “cash management activities”.
The move, which left analysts scratching their heads, has now caused Moody’s to change its outlook for Vedanta’s ratings from stable to negative, effectively putting the company on downgrade watch.
“Moody’s earlier ratings on Vedanta were based on the expectation that Volcan will not move cash from Vedanta to provide liquidity to itself.
“The deferred payment is therefore a clear departure from this expectation, and exacerbates the risk that Volcan will continue to use Vedanta as a financing vehicle,” the ratings agency said today.
Vedanta was forced to clarify the move this morning after markets were left confused.
It said that the investment, which “provides significantly higher returns compared to other overseas cash management investments,” only used five per cent of the group’s $5bn cash.
It is the latest in a series of odd moves by Indian billionaire Anil Agarwal.
He fuelled speculation of a takeover in 2017 by borrowing a fifth of all shares in Anglo American.
“Mr Agarwal's intentions remain unclear,” Myles Allsop an analyst at UBS said in a note. “In our opinion, it is possible the move is to alleviate Volcan’s balance sheet pressures, rather to prepare for conversion.”