Ind-Ra upgrades Vedanta and its NCDs to ‘IND AA'/Stable; Affirms CP

30 Mar 2022 , 12:52 PM

India Ratings (Ind-Ra) has upgraded its long‐term issuer rating of Vedanta Limited to ‘IND AA’ from ‘IND AA‐’, and has revised the outlook to ‘Stable’ from ‘Positive’ on March 29, 2022.

The rating on Non-convertible debentures (NCDs) of Rs75 billion has been upgraded to IND AA/Stable. The rating on Term loans till December 2030 Rs30.69 billion has been also upgraded to IND AA/Stable.

The credit agency also upgraded the rating on the Project finance facility Rs5 billion at IND AA/Stable. On Commercial paper (CP) 7 to 365 days Rs70 billion. IND A1+ rating has been affirmed.

At around 12.55 pm, Vedanta Ltd was trading at Rs399.95 per share down by Rs10.65 or 2.59% from its previous closing of Rs410.60 per share on the BSE.

“Ind-Ra continues to take a consolidated view of VDL and its subsidiaries, together referred to as the VDL group, due to the strategic, operational and financial linkages among them. The agency also factors in the debt of the parent company, Vedanta Resources Limited (VRL), while arriving at the ratings,” Ind-Ra said in a press release on its website on Tuesday.

The rating upgrade reflects the group’s continuous deleveraging and Ind-Ra’s 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. The surplus cash is likely to underpin high dividends to address the refinancing requirements of the parent.

Also, there is a favorable change in VDL’s group structure, led by VRL’s increased stake of 69.7% in VDL as of November 2021 from 50.1% in November 2020. The improved group structure will reduce the dividend cash leakages and improve the financial flexibility of the group. Also, the group has notified the agency its focus being deleveraging and maintaining adjusted net leverage (inclusive of the parent debt) in the band of 2.5x to 2.75x.