Vedanta Resources (NSE: EQVEDL) share price plunged to the lowest point since December 27 as concerns about the company’s balance sheet remains. With Adani Group facing headwinds, investors believe that Vedanta could be exposed to issues in its balance sheet. The stock plunged to a low of 285.60 INR, which was about 11.83% below the highest point in 2023. This means that it has moved into a correction area.
Balance sheet challenges remain
Vedanta Resources is a leading mining company that focuses on iron ore, steel, copper, oil and gas, and zinc, lead, and silver among others. As a result, the stock has been in the spotlight recently as commodity prices have remained under intense pressure. Silver has plunged sharply from its highest point this year while natural gas price has nosedived.
Vedanta Resources is facing a bigger problem than the ongoing commodity prices. It has a huge debt problem that has seen many investors comparing it to Adani. The company has managed to reduce its debt from about $10 billion to $8 billion in the past few months.
Rating agencies have downgraded the company and analysts warn that it could be slashed below B- credit rating. As a result, Vedanta’s bonds have crashed, with the August 2024 note moving to below 70 cents on the dollar. In January, the same bond was trading at 92.1 cents on the dollar.
Vedanta’s biggest challenge came from New Delhi, which has resisted moves to offload THL Zinc to Hindustan Zinc. Vedanta owns about 60% of Hindustan. The Indian government has resisted the deal and urged it to explore non-cash methods of acquisitions.
Vedanta faces other challenges as well. For one, data published last week showed that America’s inflation remained red-hot in January. This could push interest rates much higher, which will make it difficult to raise capital. The other challenge is that the company could struggle if the commodity supercycle ends. It also faces significant political challenges in India.
Vedanta Resources share price forecast
VEDL chart by TradingView
On the daily chart, we see that the VEDL stock price has made a bearish breakout in the past few days. This bearish breakout happened after the stock made a rising wedge, which is a bearish sign. It has also moved below the 50-day moving average while the Relative Strength Index (RSI) has moved to the oversold level.
Therefore, with the ongoing negative headlines, the stock will likely continue falling as sellers target the next key support point at 250 INR. The stop-loss of this trade will be at 300 INR.
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