CRISIL upgrades Vedanta’s long-term debt, loan ratings from ‘AA-‘ to ‘AA’

0

CRISIL Ratings raised the rating of Vedanta Ltd’s bank facilities and long-term debt instruments from “AA-” to “AA” due to stronger than expected operating profitability, driven by high commodity prices in the fiscal year 22. The upgrade also takes into account volume growth across all businesses and continued profitability, particularly in the aluminum business.

The short-term rating of bank facilities and commercial paper has been reaffirmed at ‘CRISIL A1+’.



While commodity prices are expected to moderate in FY23, relative to current spot levels, prices are expected to remain healthy. Thus, Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) is expected to be higher than expected at over Rs 44,000 crore in FY22. It was around Rs 27,500 crore in FY21.

The company’s EBITDA is expected to exceed Rs 40,000 crore in FY23 and would contribute to improved free cash flow and return on capital employed in the medium term.

In addition, management should use accrued liabilities to reduce funded debt outstanding and improve resilience to a decline in commodity prices.

CRISL said the strong improvement in operating expenses and the expected reduction in outstanding consolidated gross and net debt should help net debt fall to 2.2-2.3 times as of March 31, 2022, and stay below 2.5 times thereafter. Net leverage was 3.1x as of March 31, 2021.

The company’s promoters sought to improve the corporate structure by increasing their stake in Vedanta Ltd. Between December 2020 and December 2021, they increased their stake in Vedanta to 69.7% from 50.1%, via additional debt of nearly $2.4 billion. . While this reduced the payment of dividends to minority shareholders and improved overall financial flexibility, it also increased consolidated debt.

Vedanta’s improved profitability in fiscal 2022 could help reduce Vedanta Resources Ltd’s debt from December 2021 levels, and thereby support consolidated deleveraging, he added.

Dear reader,

Business Standard has always endeavored to provide up-to-date information and commentary on developments that matter to you and that have wider political and economic implications for the country and the world. Your constant encouragement and feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these challenging times stemming from Covid-19, we remain committed to keeping you informed and updated with credible news, authoritative opinions and incisive commentary on relevant topical issues.
However, we have a request.

As we battle the economic impact of the pandemic, we need your support even more so that we can continue to bring you more great content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of bringing you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism we are committed to.

Support quality journalism and subscribe to Business Standard.

digital editor

Share.

Comments are closed.