S&P upgrades Vedanta Resources rating on improving capital structure

London: Vedanta Resources Limited (‘VRL or the company’), world’s leading natural resources, energy and technology conglomerate on Thursday announced that S&P Global Ratings (‘S&P’) ‘has upgraded its ratings from ‘CCC+’ to ‘B-’ citing the company’s improving capital structure and liquidity while assigning a stable outlook.

The rating upgrade reflects VRL’s strong credit profile with a long-standing record of delivering superior performance and healthy free cash flows. VRL 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 $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 $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 $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:

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

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

3. S&P expects zinc EBITDA to increase about 25 per cent and that for aluminum almost 50 per cent in fiscal 2025.