The corporate credit rating on Vedanta reflects our view that the holding company's financial risk profile is 'aggressive' and its business risk profile is 'fair,' as defined in our criteria.
Vedanta's financial strategy, which we view as aggressive, places much of its debt, but a minimum of its cash, at the holding company. Operational risks in Vedanta's metals and mining businesses in India are growing, in our opinion. The company has limited backward integration in aluminum, power, and copper. Vedanta is also exposed to the volatility in commodity prices. Nevertheless, the company's strong market position in zinc and its low-cost production in oil and gas partly offset the above weaknesses. In addition, Vedanta's cash flow coverage metrics are supportive of a higher financial risk profile when viewed on a consolidated basis.
We believe that Vedanta's business and cash flow diversity has improved with its acquisition of Cairn India Ltd. We expect the acquisition of the oil and gas company to increase Vedanta's consolidated profitability and improve its cash flows. In line with our expectation, Cairn recently received approval to increase its oil production by 25,000 barrels per day from its Rajasthan block. We expect the zinc and oil businesses to contribute more than half of Vedanta's consolidated cash flows in fiscal 2013.
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