- Improved capital structure, better financial flexibility, and strong volume growth key reasons.
- Rating upgrade factors expected material improvement in consolidated operating profitability: CRISIL
- Favorable prices and cost reduction to support growth in consolidated EBITDA.
- Material reduction in the refinancing risk for the group supported by prudent capital allocation
CRISIL upgraded its rating on Vedanta’s long-term bank facilities and debt instruments to ‘AA’ from ‘AA-’ while reaffirming the short-term rating at A1+.
“The rating upgrade factors the expected material improvement in the consolidated operating profitability (earnings before interest, tax, depreciation and amortisation [Ebitda]) of Vedanta along with improved capital structure with reduction in debt and leverage to below rating thresholds” CRISIL said in its rating rationale.
CRISIL has noted that Vedanta’s consolidated operating profitability (EBITDA, excluding brand and management fees to VRL) is expected to increase to more than Rs 45,000 crore in fiscal 2025, mainly supported by volume growth in aluminium, zinc international and iron ore segments, improved cost efficiencies in zinc and aluminium and healthy metal prices.
EBITDA is expected to improve further in fiscal 2026, with expected completion of ongoing capital expenditure (capex) for capacity increase and operating efficiency improvement, especially in the aluminium business, it added.
This is the second upgrade for Vedanta by a major credit agency in the last three months. In September, ICRA had upgraded Vedanta Limited’s long-term credit rating to AA from AA-, citing company’s strengthened credit profile.
In its rating rationale, CRISIL has also factored in Vedanta’s moves to deleverage its balance sheet and improving financial flexibility. “The promoters and group management have been articulating about increased focus on deleveraging balance sheets at VRL as well as at operating levels.
This commitment has been reflected in recent fundraising events such as QIP and OFS by Vedanta, and stake sale by VRL which have resulted in cumulative fundraising of USD 1.9 billion by the group during April-August 2024.” the rating agency said, while expecting Vedanta’s net debt to continue declining further after FY 2025 as well.
Vedanta’s ability to withstand cyclicality in commodity business and lower cost of production are another important factors highlighted by the rating agency. “The Vedanta group operates across various businesses spanning zinc, lead, silver, aluminium, oil and gas, iron ore, power and steel. The group is among the largest producers in all these segments, thus commanding a strong position in the domestic market. A well-diversified business risk profile cushions the group from commodity-specific risks and cyclicality.” CRISIL said.
CRISIL Ratings has taken note of admission of the proposed demerger of Vedanta businesses into separate listed companies to the National Company Law Tribunal (NCLT), increasing the likelihood of successful completion of the demerger.
Vedanta’s UK based parent – Vedanta Resources Limited – also recently received rating upgrades from an international credit agency. US-based Moody’s upgraded Vedanta Resources Ltd.’s (VRL) corporate family rating to B2 from B3 and the rating on the company’s senior unsecured bonds to B3 from Caa1. Further, last month Fitch also published Vedanta Resources’ first-time “B-” Rating with Positive outlook.
