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Moody’s affirms Vedanta’s ratings with stable outlook

Singapore, June 17, 2009 -- Moody's Investors Service has today affirmed 
the Ba1 corporate family rating and Ba2 senior unsecured rating of 
Vedanta Resources plc ("Vedanta"). The outlook on the ratings is stable.

The rating action follows the acquisition by Vedanta's subsidiary Sesa 
Goa of the mining assets of the Dempo Group for US$368 million; Vedanta's 
offer to increase its shareholding in Sesa Goa from 53.1% to 55% for 
around US$120 million; and Vedanta's issuance of a $1.25 billion 
convertible bond.

"The acquisitions at Sesa Goa level are relatively small in their actual 
amounts as compared to the group's size, and are in line with the 
company's strategy to increase its iron ore capacity while streamlining 
the group structure by increasing shareholdings in those subsidiaries 
that it does not fully own," says Ivan Palacios, a Moody's AVP/Analyst.

"Nevertheless, the announced acquisitions will reduce the company's 
cushion within its current rating. These acquisitions add to an already 
heavy expansion plan, which includes the acquisition of minority 
interests in BALCO and Hindustan Zinc, the potential acquisition of 
Asarco, and an ambitious capital expenditure program, of which US$7.6 
billion is yet to be spent," says Palacios, also Moody's lead analyst for 
the company.

In Moody's view, Vedanta's US$1.25 billion convertible bond issuance 
improves the company's near-term liquidity profile. In addition, the 
amount raised is in line with Moody's expectations when Vedanta was 
downgraded to Ba1 in December 2008.

However, the convertible bond issuance and the drawings on the long-term
project finance that Vedanta has recently secured will together increase
the company's on-balance-sheet leverage -- which stood at US$5.1 billion 
as of FY2009 -- and weaken its credit metrics.

"As a result of the aggressive expansion strategy, the incremental debt 
funding and the expectation of weaker near-term performance due to the 
challenging environment for base metals, Moody's believes that Vedanta's 
key financial metrics could temporarily exceed the tolerance level set 
for the rating", says Palacios.

"However, Vedanta's stable outlook is supported by the expectation that 
its financial profile will strengthen again beyond FY2010, once the new 
projects gradually come on-stream and start generating the expected 
returns," adds Palacios.

The rating also assumes continued covenant compliance management by the
issuer. In this context, downward rating pressure could develop in the 
event that weaker-than-expected profitability reduces significantly the 
headroom under Vedanta's financial covenants.

Vedanta's stable outlook is underpinned by its strong liquidity profile, 
and Moody's expectation of a progressive improvement in the company's 
financial profile beyond FY2010. This is balanced against a very 
challenging operating environment, as well as the risk of further 
investments beyond the large amount already committed.

Moody's notes, however, that there is limited tolerance in the rating for 
further debt-financed expansion plans or further weakness within the 
operating environment for base metals.

Positive pressure on the rating could develop if 1) demand and price 
levels for base metals stabilise; 2) the planned expansion projects start 
generating the expected returns; 3) there is evidence of a stable and 
sustainable business profile for the company; and 4) there is an 
improvement in the company's complex structure.

The rating could see upward pressure once the company demonstrates a 
sustainable ability to maintain the following financial metrics on a 
consistent basis: CFO (less dividends)/Adjusted debt over 25% - 30%,
Adjusted Debt/ EBITDA below 2.5x -- 3.0x, and EBIT interest coverage 
over 5.0x -- 6.5x.

Conversely, the ratings could come under downward pressure if 1)
Vedanta's profitability declines beyond Moody's expectations for FY2010;
2) it undertakes further acquisitions, investments or shareholder
remuneration policies that include incremental debt; or 3) it fails to 
satisfactorily execute its expansion projects.

Credit metrics that Moody's would consider for a ratings downgrade include 
CFO (less dividends)/Adjusted Debt below 15%, Adjusted Debt to EBITDA 
exceeding 4x, or EBIT interest coverage declining to 3.5x or less on a 
sustained basis.

The last rating action with regard to Vedanta was taken on March 10,
2009, when Moody's stated that Vedanta's proposed acquisition of Asarco 
for US$1.7 billion could be accommodated within the company's Ba1 rating.

The principal methodology used in rating Vedanta was "Rating Methodology:
Global Mining Industry", which can be found at www.moodys.com in the 
Credit Policy & Methodologies directory, in the Ratings Methodologies 
subdirectory. Other methodologies and factors that may have been 
considered in the process of rating this issuer can also be found in the 
Credit Policy & Methodologies directory.

Headquartered in London, UK, Vedanta Resources plc is a metals and mining 
company focusing on integrated zinc, alumina/aluminum and copper smelting 
and refining and iron ore mining. Its operations are predominantly 
located in India. It is listed on the London Stock Exchange and is 59.06 
% owned by Volcan Investments Ltd.

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