Vedanta, Vedanta Aluminium, Vedanta Power: ICRA ratings after demerger clarity

Vedanta Ltd has seen a rating upgrade from credit rating agency ICRA Limited, an affiliate of Moody's Corporation, on its long-term credit rating to ICRA AA+ with stable outlook, led by a material improvement in its credit profile in FY26, with further improvement expected in FY27.

The rating agency gave ICRA AA+ rating to demerged entity Vedanta Aluminium Metal Limited with outlook stable. Talwandi Sabo Power Limited, another demerged entity that would be listed as Vedanta Power Ltd, is rated ICRA AA- with outlook stable.   

A favourable price-cost movement for Vedanta group companies will result in a material improvement in the financial performance of the group with significant improvement in capital structure, liquidity and debt coverage indicators, ICRA said. It said the refinancing ability of the Vedanta group has also improved materially, resulting in sharp easing in average interest cost in FY26. 

"Moreover, the refinancing risk at Vedanta Resources Limited (VRL) has also reduced significantly in the last few years supported by repayments and elongation of the debt maturity profile," ICRA said. 

Vedanta outlook
ICRA has removed the ratings on Vedanta Limited from watch with developing implications, following a greater clarity on the allocation of assets and  liabilities under the ongoing  demerger scheme of the Vedanta Group,as  well  as the support framework across group entities. ICRA has also upgraded the long-term rating on Vedanta, factoring in ICRA’s expectation of a further strengthening in the credit profile of the Vedanta Group in FY27. 

"This has been supported by a sharp increase in base metal prices, which  has  contributed  to  a  strong financial  risk  profile for the Group,  which reported an OPBDITA  of  $6.7 billion in FY2026.  Considering  the  proportionate  consolidation  of  Hindustan Zinc Limited, the  OPBDITA  still remained healthy at $5.7 billion in FY2026, compared to ~$3.8 billion in FY2025," ICRA said. 

Post-demerger, ICRA expects the relatively stronger cash-generating entities within the Vedanta group to support its dividend requirements, with the flexibility to fund the same from other group entities as well. Further, ICRA also expects that the intra-group support among entities in the Vedanta Group to continue, if required.

Vedanta Aluminium Metal outlook
ICRA said it finds greater clarity on the allocation of assets and liabilities under the ongoing demerger scheme of Vedanta as well as the support framework across group entities. It said its rating action factors in expectation that Vedanta Aluminium Metal's  financial profile will strengthen further in FY2027,  following the strong improvement seen in FY26, owing to a sharp increase in aluminium prices globally. 

On the London Metal Exchange (LME), it noted that aluminum prices remained firm during FY26 with an average of $2,771/tonne, around 10 per cent higher compared to the previous financial year. 

ICRA said aluminium prices have continued to be elevated in the current fiscal so far and are expected to remain firm in the near term,  given  the  global  supply-side  constraints  and  the  ongoing  geopolitical  situation.  

"The elevated  prices  are expected  to support VAML’s credit profile. The cost  structure,on  the  other  hand,is  expected  to  remain  steady,  which  coupled  with favourable LME  prices  is  likely  to translate into a healthy OPBDITA/tonne of more than $1,250/tonne in FY2027," it said.

ICRA said volumes for Vedanta Aluminium are also expected to increase with the commissioning of Bharat Aluminium Company Limited’s (BALCO) smelter and value-added product (VAP)capacity. Supported by the improved profitability, the coverage metrics are expected to remain strong with a total debt to operating profit (TD/OPBDITA)of less than 1.5 times and interest coverage of around 7.0 times in the near to medium term, improving from 1.7 times and 6.4 times, respectively, in the previous year, ICRA said.

Vedanta Power outlook
In the case of Talwandi Sabo Power Ltd, to be rechristened as Vedanta Power Ltd, ratings has been upgraded and is removed from watch with developing implications. A stable outlook is assigned on its long-term rating, following a greater clarity on the allocation of assets and liabilities, under ongoing demerger scheme of Vedanta group as well as on support framework across group entities. 

The ratings upgrade factors in the improvement in Vedanta Power's operational and financial risk profile following the inclusion of additional power assets in its portfolio, namely the 600 MW Jharsuguda Independent Power Plant (JIPP) in Odisha, the 600 MW (unit-1) Athena Chhattisgarh Power (ACP) plant in Chhattisgarh (unit-2 600 MW under construction currently), and the 1,000 MW Meenakshi power plant in Andhra Pradesh. 

In addition, ACP’s unit-2 of 600 MW is also expected to be commissioned
by the end of ongoing financial year. The expanded asset base is expected to strengthen the overall credit profile through enhanced scale, improved diversification and greater cash flow stability.