VRL’s Growth Drives Moody’s to Upgrade Credit Rating Amid Investor Optimism

Chandigarh, 29th November 2024: US-based credit rating agency Moody’s Ratings has upgraded Vedanta Resources Ltd.’s (VRL) corporate family rating to B2 from B3 and the rating on the company’s senior unsecured bonds to B3 from Caa1. While doing so, Moody’s has maintained a positive outlook on both the ratings while citing growing investor confidence as one of the reasons for the upgrade. This is the second upgrade by Moody’s for VRL within a month after an earlier upgrade in October.

“The rating upgrade follows VRL’s successful liabilities management exercises, with the company raising $800 million in its second bond issuance since September 2024,” said Nidhi Dhruv, Vice President and Senior Credit Officer at Moody’s. “The bond issuances in quick succession solidify Vedanta’s access to capital markets as well as growing investor confidence in the company,” she added.

Moody’s has noted in its rating upgrade that VRL’s recent liabilities management initiatives—refinancing using proceeds from newly issued bonds along with dividends from subsidiaries and proceeds from subsidiary stake sales—have led to significant debt reduction and extension of the holding company’s debt maturity profile.

The credit rating agency has also taken a note of VRL’s large-scale and diversified low-cost operations. “Exposure to a wide range of commodities such as zinc, aluminum, iron ore, oil and gas, steel and power; strong position in key markets, enables it to command a pricing premium; and history of relative margin stability through commodity cycles,” Moody’s said in its rating.

Earlier this year, another rating major – S&P Global Ratings (“S&P”) had upgraded VRL’s ratings to ‘B-‘ citing the company’s improving capital structure and liquidity while assigning a stable outlook.

The upgrade by Moody’s comes on the heels of Vedanta’s recent bond issuances, which have strengthened the company’s capital structure. On November 26, Vedanta Resources Finance II PLC (VRF), a subsidiary of VRL, said that it had raised US$800 million by issuing new bonds. Similarly, Vedanta Resources raised US$1.2 billion between September and October through bonds. Vedanta Resources bonds due in April 2026 have climbed nearly to par after touching a low of about 60.4 cents in January, according to data compiled by Bloomberg. With nearly 77% gain this year, these bonds are the one of the best-performing in their category in Asia.

The growing investor confidence is also due to robust performance by VRL’s Indian subsidiary – Vedanta Ltd, which recently delivered robust earnings for Q2 and H1FY25. The company delivered quarterly EBITDA at ₹10,364 crores, which rose 44% on a YoY basis.[1] Similarly, Vedanta recorded its highest ever first half EBITDA at ₹20,639 crores, which was up 46% on a YoY basis[2]. Vedanta also said in its recent investor presentation that it has delivered a 5-year total shareholder return of 378%, while its 5-year dividend yield was 67%. It also recorded its lowest net debt to EBITDA ratio in last 6 quarters, which improved from 1.64x to 1.49x on a YoY basis.

India’s dedicated company law tribunal (NCLT) recently made an order giving a go ahead to Vedanta Ltd. to hold meetings of its equity shareholders and secured and unsecured creditors as a part of its proposed demerger. Vedanta had announced a plan in September last year to demerge its business units into independent “pure play” companies.