Moody’s Ratings has upgraded Vedanta Resources Limited's (VRL) corporate family rating (CFR) to B2 from B3, indicating improved confidence in the company’s ability to meet its overall debt obligations. The rating for its senior unsecured bonds has also been raised to B3 from Caa1, which was previously considered a higher credit risk category.
The outlook remains stable, highlighting Moody’s expectation that VRL will continue to manage its debt maturities effectively and maintain its financial stability.
The upgrade follows VRL’s successful debt management, including raising $800 million through two bond issuances since September 2024. The proceeds will partly repay its December 2028 notes, leaving $400 million outstanding.
Moody’s believes additional issuance may address this remainder. Importantly, these issuances are not classified as distressed exchanges, as they neither avoid an imminent default nor result in economic losses for investors.
Vedanta's next key maturity is a $600-million bond due in April 2026, which must be refinanced by December 2025 due to a covenant introduced during earlier debt restructuring. Moody’s expects timely action, citing Vedanta’s demonstrated access to capital markets.
Debt management and operational strengths
Vedanta has reduced its holding company debt from $9.1 billion in March 2022 to $4.8 billion by September 2024, supported by refinancing, dividend inflows from subsidiaries, and asset sales. Its diverse operations across commodities like zinc, aluminium, and oil and gas provide stable earnings despite price fluctuations.
For FY2024-26, Moody’s forecasts EBITDA of $5.3-5.4 billion and a cash flow of $2.8-3 billion, but the annual capital expenditure of $2.5 billion may require additional borrowing.
Liquidity challenges
While VRL generates cash through dividends from subsidiaries, liquidity at the subsidiary level has thinned, with reserves down from $4.2 billion in March 2022 to $2.6 billion by September 2024. Subsidiaries rely on short-term borrowing and working capital facilities to manage fluctuations.
Outlook
The stable outlook reflects confidence in Vedanta’s refinancing plans. Ratings could improve if leverage remains below 4.5x and EBIT/interest coverage exceeds 2x. However, downgrades may occur if lower commodity prices weaken cash flow or credit metrics.
