S&P Global upgrades Vedanta Resources to 'B-' from ‘CCC+’ on improved capital structure, liquidity

Billionaire Anil Agarwal-controlled Vedanta Resources Limited on Thursday said that S&P Global Ratings has upgraded its ratings from 'CCC+' to 'B-' citing the company’s improving capital structure and liquidity while assigning a stable outlook. The natural resources, energy to technology conglomerate has been significantly deleveraging its balance sheet leading to a robust capital structure that supports sustainable growth over the long term. S&P revised its estimates on VRL’s earnings, estimating the EBITDA for fiscals 2025 and 2026 to be in the range of US$5.5 billion - US$6.0 billion annually.

The rating upgrade reflects VRL’s strong credit profile with a long-standing record of delivering superior performance and healthy free cash flows. S&P revised its estimates on VRL’s earnings, estimating the EBITDA for fiscals 2025 and 2026 to be in the range of $5.5 billion-$6.0 billion annually.

The ratings agency also estimates the debt at the Vedanta Resources level to decline by another $1 billion to about $4.5 billion over the next 12 months. It also estimates interest expenses at the Vedanta Resources level to drop to $550 million–$600 million by the end of fiscal 2025 (ending March 31, 2025).

S&P noted in its research update that VRL has adequate internal funds to meet US$1.4 billion of debt maturities due by end 2025. The stable outlook reflects our view that the company will proactively address the maturity of US$1.2 billion of debt in April 2026, the firm said in its research update.

Key factors noted by S&P in its research update include:

• VRL's strengthening cash flow position and the recent increase in the valuation of Vedanta Ltd. shares improve funding flexibility.

• VRL’s earnings are benefitting from favorable product prices and cost-reduction initiatives, particularly in the aluminum business.

• S&P expects zinc EBITDA to increase by about 25% and for aluminum by almost 50% in fiscal 2025.

On July 19, Vedanta Limited said on it raised Rs 8,500 crore through Qualified Institutions Placement (QIP), which opened on July 15, at Rs 440 per share. This implies a discount of 4.61% to the floor price of Rs 461.26 per equity share. In a stock exchange filing, Vedanta said it sold 19.31 crore shares to raise the amount.

Vedanta Chairman Anil Agarwal said, “The overwhelming response to the Vedanta QIP underscores the huge confidence that the global investor community has in Vedanta - our unique set of irreplaceable world-leading assets, our quest for operational and cost excellence, and the solidity of our strategic future growth projects. We remain closely aligned with the goals of ensuring India’s self-reliance and security in the area of critical minerals and energy, while contributing significantly to the nation's economic prosperity and the creation of shareholder value."