CRISIL Upgrades Vedanta’s Credit Rating to AA, Signaling Strong Financial Improvements

Varahimedia.com online news, December 5th,2024: CRISIL has upgraded Vedanta Limited’s long-term bank facilities and debt instruments rating from ‘AA-’ to ‘AA’, while reaffirming the short-term rating at A1+. This upgrade reflects the company’s strengthened consolidated operating profitability (EBITDA) and improved capital structure with reduced debt levels.

CRISIL highlighted Vedanta’s expected growth in operating profitability, with EBITDA projected to surpass ₹45,000 crore in FY 2025. This is attributed to:

• Increased volumes in aluminium, zinc international, and iron ore segments.
• Improved cost efficiencies in zinc and aluminium.
• Favorable metal pricing trends.

Further improvements in EBITDA are anticipated for FY 2026 as ongoing capital expenditure (capex) projects aimed at enhancing capacity and operational efficiency, particularly in the aluminium business, are completed.

CRISIL also acknowledged Vedanta’s focus on deleveraging its balance sheet and enhancing financial flexibility. Recent fundraising initiatives, including Qualified Institutional Placements (QIP), Offer for Sale (OFS), and strategic stake sales, have collectively raised $1.9 billion for the group between April and August 2024.

This reflects the promoters’ commitment to reducing leverage both at Vedanta Resources Limited (VRL) and the operating levels.

Vedanta’s net debt is expected to decline further beyond FY 2025, supported by strong operational cash flows and financial discipline.

Vedanta’s robust diversification across key sectors, including zinc, lead, silver, aluminium, oil and gas, iron ore, power, and steel, positions it as a leader in these industries. CRISIL emphasized that this well-rounded business profile provides a buffer against commodity-specific risks and market cyclicality.

CRISIL noted that the proposal to demerge Vedanta’s businesses into separate listed entities has been admitted by the National Company Law Tribunal (NCLT). This enhances the likelihood of a successful demerger, which is expected to streamline operations and unlock shareholder value.

This marks Vedanta’s second credit upgrade by a major agency within three months. In September 2024, ICRA upgraded Vedanta’s long-term credit rating to ‘AA’, citing a strengthened credit profile.

Additionally, Vedanta’s UK-based parent, Vedanta Resources Limited (VRL), has received international recognition. Moody’s upgraded VRL’s corporate family rating from B3 to B2, while Fitch assigned VRL its first “B-” rating with a positive outlook.

Vedanta’s ability to navigate commodity market challenges, maintain low production costs, and deliver strong operational performance underscores its enhanced creditworthiness and financial resilience.

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