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Singapore, Apr 25 (UNI) Standard and Poor's Ratings Services today affirmed its 'BB' Foreign Currency Corporate Credit and Senior Unsecured Debt Ratings on Vedanta Resources PLC's (Vedanta), following its acquisition of a majority holding in Sesa Goa Ltd India.

''While this acquisition will sharply increase Vedanta's gross debt, its adverse impact will be mitigated by the improvement in the company's financial profile and the relative adequacy of its credit protection ratios for its rating level,'' said Credit Rating Agency Standard and Poor's credit analyst Anshukant Taneja.

The negative outlook on Vedanta reflected the persisting uncertainties on mining approvals for its 2.1 billion dollar aluminium project in Eastern India and the risks associated with its proposed 1.9 billion dollar investment in power generation, he said.

Standard and Poor's considers that now the negative outlook also captures the uncertainties and the risk of increased leverage associated with the Sesa Goa acquisition.

''In resolving the negative outlook on Vedanta, we would assess the final decision on mining approvals and its potential impact on Vedanta's aluminium business, risk profile and financing strategy for its power generation investments,'' Mr Taneja noted.

''We would also clarify the long-term integration, financing and growth plans for Sesa Goa,'' he said.

An acceptable resolution to these issues is likely to mitigate some of the business risks faced by Vedanta and if accompanied by a moderated approach to growth and reduced dependence on debt and maintenance of the company's financial profile, can potentially result in an improvement in the ratings or outlook, he added further.

On the other hand, persisting uncertainties on approvals, aggressive debt-supported growth in existing or new businesses, and risks associated with large-scale projects may continue to weigh on the outlook and the rating.

Vedanta acquired a 51 per cent stake in Sesa Goa from Japan's Mitsui&Co Ltd for 981 million dollar.

An open offer to public shareholders for an additional 20 per cent stake will bring the total acquisition price to 1.37 billion dollar, largely funded by debt.

Sesa Goa is an iron ore producer and exporter, with mining operations in India and reported iron ore reserves of 207 million tonnes.

UNI