· Recent refinancing with lower interest rates & further deleveraging driving the upgrade
· Proposed demerger, enhanced volumes & cost efficiencies across key businesses among positives
· CRISIL and ICRA had also upgraded Vedanta ratings in past 4 months
Bengaluru, December 16, 2024: India Ratings has upgraded its rating on Vedanta Ltd.’s non-convertible debentures to AA- from A+. Key reasons for the upgrade include Vedanta’s improved financial flexibility, progress on the demerger, and expected material deleveraging post FY27.
“The upgrade reflects an improvement in Vedanta’s financial flexibility on account of a material reduction in the refinancing risk of USD bonds at Vedanta Resources Limited under the liquidity management exercise given the recent fund raising, which is expected to alleviate liquidity risks at Vedanta Limited,” India Ratings said in its report
“The ability of Vedanta Limited and Vedanta Resources Limited to access debt markets at lower interest rates and improved EBITDA contribution from the aluminium business provide improved visibility of a sustained reduction in consolidated financial leverage post FY27,” it added.
This is Vedanta Ltd.’s third rating upgrade in the last four months. Earlier this month, 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+. Similarly, ICRA upgraded Vedanta Limited’s long-term credit rating to ‘AA’ from ‘AA-’ in September.
Regarding Vedanta’s proposed demerger, India Ratings said that it does not expect individual entities’ liquidity and credit profile post the demerger to deteriorate. “Hence, the rating is likely to be maintained or improved from the current levels,” the rating agency said in its report.
The rating agency also expects good per-tonne EBITDA in Vedanta’s aluminium business in FY25 and FY26. This business is likely to benefit from a reduction in power costs due to improved coal linkages. According to the report, the EBITDA is supported by the volume ramp-up, the commissioning of new capacities, and the fall in the cost of production for the aluminium business.
Shares of Vedanta Ltd. touched a new 52-week high of Rs 526.95 during trading on December 16 on the back of an extended metal rally and other operational factors. Vedanta’s shares have rallied more than 100% year to date, showing a 5x outperformance on the Nifty metal index, which has rallied ~17%. The company’s market cap also crossed the Rs 2 lakh crore mark in this financial year.
