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Informist, Thursday, Jun. 25, 2026

 

NEW DELHI – Fitch Ratings has assigned "BB" rating to the senior notes proposed to be issued by Vedanta Resources Finance II Plc., a wholly-owned subsidiary of Vedanta Resources Ltd., according to a press release by the rating agency Thursday. "The proposed notes will be unconditionally and irrevocably guaranteed by VRF2's (Vedanta Resources Finance II) parent, Vedanta Resources Ltd. (VRL, BB/Stable), Accordingly, the proposed notes are rated at the same level as VRL (Vedanta Resources Ltd)," the agency said in the release.

 

The proposed notes, secured by brand-fee receivables of Vedanta Resources, will primarily be used to refinance existing dollar bonds, helping to extend debt maturities and lower borrowing costs. Fitch Ratings said it expects higher commodity prices, healthy volumes, and lower cost of debt to help Vedanta Resources report earnings before interest, taxes, depreciation, and amortisation of around $8 billion annually in the financial year 2026-27 (Apr-Mar) and FY28, from an estimated $6.8 billion in FY26, and improve its financial profile. Increased backward integration in aluminium and higher use of renewable power in zinc operations are expected to further support the mining company's earnings.

 

"The stable outlook reflects our expectation that VRL's (Vedanta Resources Ltd.'s) proportionately consolidated credit metrics and holdco (holding company) capital structure--comprising VRL and its other offshore investment holdcos--will remain consistent with the rating over the next few years," the agency said.

 

Fitch Ratings expects cost reductions from increased backward integration in aluminium and greater use of renewable power in zinc to be better than anticipated, providing an upside to the EBITDA estimates. It also expects the company's consolidated EBITDA net leverage to fall to about 2.1 times in FY27 and FY28, and EBITDA interest coverage to improve to 4.5 times against the FY26 estimate of 3.6 times, aided by robust EBITDA, lower gross debt, and lower debt funding cost. However, lower-than-expected commodity prices or higher-than-expected cost inflation could delay the deleveraging, it cautioned.

 

The agency expects the company's average interest rate, on a consolidated basis, to fall to around 9%, which in turn will reduce its cash interest expenses to around $1.2 billion by FY28, from $1.6 billion in FY26. Material reduction in debt funding cost is driven by the plan of Vedanta Resources to refinance its higher-cost US dollar notes, as per the rating agency.

 

The agency expects brand fees and operating companies' dividends to cover $800 million–$1 billion of annual holding company debt service in FY26-FY29. It also expects the holding company's debt to gradually reduce to around $4.5 billion in FY29 from $5.2 billion in FY26.

 

Fitch Ratings expects the capital expenditure of Vedanta Resources to rise to about $2.4 billion a year in FY27-FY28, and dividends to increase to $250 million from FY27, aided by an improved credit profile. The rating agency also expects any additional investing or financing cash outflows to be within the scope of the company's deleveraging plans. Significant deviation from these assumptions, particularly if it coincides with weaker EBITDA, could present credit risks, as per the rating agency.

 

The rating agency said Vedanta Resources benefits from its large scale, leading position in some segments, and commodity diversification, with zinc, aluminium, and oil and gas contributing around 40%, 40%, and 7%, respectively, to the company's EBITDA for FY26. However, the prices of most of these minerals tend to move sharply and in the same direction, it added.

 

The rating agency, however, said two of the company's small three-member board are from the same family, which may limit independent monitoring and creditor protection. The group structure is also complex with structurally subordinated cash flows, operating companies held through multi-jurisdiction intermediate subsidiaries, and limited clarity on contagion risk from other shareholder-owned businesses, it added.

 

"Adverse regulatory rulings, including restrictions on brand fee payments due to adverse findings or penalties from regulatory investigations like recent searches by ED and crystallisation of material contingent liabilities are event risks," the agency said. 

 

In India, Vedanta Resources operates through Vedanta Ltd., Vedanta Aluminium Metal Ltd., Vedanta Oil and Gas Ltd., Vedanta Power Ltd., and Vedanta Iron and Gas Ltd. The latter four companies were demerged from Vedanta effective May 1. For the March quarter, Vedanta Ltd.'s consolidated net profit was INR 66.98 billion on revenues of INR 246.09 billion. Thursday, its shares closed at INR 273.45 on the National Stock Exchange, down 3.2% from Wednesday. Shares of Vedanta Aluminium Metal Ltd. closed at INR 442.82, down 4.4%, and Vedanta Power Ltd. closed 2.7% lower at INR 42.42. Shares of Vedanta Iron and Steel Ltd. closed 5% higher at INR 30.88 while Vedanta Oil and Gas Ltd. closed 3.2% lower at INR 33.35.  End

 

Reported by Astha Oriel

Edited by Rajeev Pai

 

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