Vedanta Resources eyes invest grade rating, plans to cut debt
New Delhi: London-based Vedanta Resources Ltd (VRL) is targeting an investment grade credit rating on the back of its sustained deleveraging, the proposed demerger at its Indian subsidiary, Vedanta Ltd, and its robust growth, operational efficiencies and strong financial performance. VRL is committed to reducing its total debt from the current $5 billion to $3 billion by FY27 while strengthening its critical minerals, transition metals, energy and technology portfolio.
A person aware of the matter said that VRL, at a recently held investor conferences in Hong Kong and Singapore, shared that the company is looking for an immediate credit rating upgrade to BB levels by proactively refinancing and prepaying its high-interest cost $550 million private credit facility due in August 2026. In the medium term, the company plans to achieve an investment grade rating on the back of its improved debt profile, financial and operational performance.
Vedanta highlighted its robust earnings, healthy free cash flows, ongoing growth projects, strengthened balance sheet, and future deleveraging plans to the investors, the source said. An investment-grade credit rating signifies a company's strong capacity to meet its financial obligations and is considered a safe investment for institutional investors. It also allows a company to borrow money at lower interest rates, attracting a broader range of investors and gaining easier access to global debt markets. At present, VRL has a credit rating of B+ by S&P, Fitch & Moody's, with S&P giving a 3-notch upgrade to the company in FY25.
The investment grade rating is linked to VRL's debt reduction target (to $3 billion) by FY27, so they are looking for an investment grade in about two years from now. Sources indicate that VRL is currently working with banks to refinance and pre-pay a $550 million private credit facility that will expire in August 2026. It is likely to use a bank loan with single-digit interest rates to refinance the facility, with savings of 800-900 basis points, resulting in interest cost savings of $47 million, said the person quoted above.
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