S&P upgrades Vedanta Resources rating on stronger finances, demerger

Synopsis

The rating upgrade reflects the company's strengthening financial operations, improving cost structures, proactive refinancing and continued deleveraging, following the group's demerger, S&P Global Ratings said in a statement.

S&P Global Ratings on Thursday said that it has upgraded the ratings of London-based Vedanta Resources Ltd to 'BB' from 'B+', citing the company's improved financial position and cost efficiency post demerger.

The rating upgrade reflects the company's strengthening financial operations, improving cost structures, proactive refinancing and continued deleveraging, following the group's demerger, S&P Global Ratings said in a statement.

An S&P Global Ratings B+ instrument signifies "significant speculative characteristics," placing it in the high-yield or "junk" category, below investment grade. It indicates that while the issuer currently has the capacity to meet financial commitments, it faces major ongoing uncertainties that make it highly vulnerable to adverse economic conditions.

"On May 14, 2026, S&P Global Ratings raised its long-term issuer credit rating on Vedanta Resources to 'BB' from 'B+'. At the same time, we raised our ratings on the company's senior unsecured notes to 'BB-' from 'B'," the statement said.

The stable rating outlook reflects our expectation of improved cash flows, proactive refinancing and continued deleveraging, the global credit rating agency said.

At the heart of the upgrades is Vedanta's improving cost competitiveness and strengthening earnings profile, particularly in aluminium.

S&P in its statement highlighted the ramp-up of the company's alumina refinery at Lanjigarh, Odisha, which is expected to increase captive alumina coverage to over 75 per cent of internal requirements by the next fiscal year, compared with around 60 per cent in fiscal 2026. As a result, the cost of production is expected to reduce by USD 50 per tonne of aluminium, resulting in higher margins.

The agency highlighted the increasing backward integration into bauxite mining, which is expected to structurally strengthen margins and reduce aluminium production costs over the next 12-18 months.

The rating agency also noted that a growing share of value-added products in aluminium and zinc is resulting in higher realisations and earnings resilience.

S&P also highlighted Vedanta Resources' significantly improved liquidity position, supported by over USD 2 billion in long-term banking lines, more than USD 3.5 billion raised through bond markets since late 2024, and cash and cash equivalents of over USD 3 billion. PTI

...moreless

...moreless