Ind-Ra upgrades Vedanta’s long-term issuer rating to ‘AA’ with stable outlook

AA-rated instruments are considered to have a high degree of safety regarding timely servicing of financial obligations.

In a statement, the ratings agency said it has “upgraded Vedanta Limited’s (VDL) long-term issuer rating to ‘IND AA’ from ‘IND AA-‘ and the outlook is stable”.

The rating upgrade reflects the group’s continuous deleveraging and expectation of an improvement in the consolidated operational cash flow in FY22 and FY23, following a significant increase in the operating profitability, led by high metal prices partly offset by raw material input inflation, Ind-Ra said.

It further said Vedanta could achieve an EBITDA of Rs 450 billion in FY22 and FY23, revised from the earlier estimate of Rs 390 billion.

The group has reported an EBITDA of Rs 400 billion in trailing 12 months (TTM) ended December 2021.

VDL is likely to witness a higher-than-expected reduction in the total debt (including parent debt) with clear capital allocation framework focussing only on high return capex, the rating agency said.

Vedanta Limited is a diversified natural resources player, with a significant presence in zinc, oil and gas, copper, aluminium, iron ore and power sectors. VDL generates 90 per cent of its consolidated EBITDA from aluminium, zinc and oil and gas businesses.