Vedanta shares gain 2% after long-term ratings upgrade from ICRA

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Shares of the metal major Vedanta on Thursday rose 2% on the BSE, reaching an intraday high of Rs 469.40, following an announcement that the company received a long-term rating upgrade from ICRA on the expectation of improvement in the company's credit metrics.

The rating for its 'Longterm/S term –Unallocated limits' instrument was upgraded to [ICRA]AA from [ICRA]AA-/[ICRA]A1+ rating watch with developing implications. The Longterm–Fund based –Term loan instrument was upgraded to [ICRA]AA from [ICRA]AA- and continues on rating watch with developing implications. As for Commercial Paper the rating was upgraded to ICRA]A1+ rating watch with developing implications.


Recently, the mining major carried out a successful fund-raising worth $1 billion via a qualified institutional placement (QIP) in July 2024 and an additional $400 million was generated from the offer for sale (OFS) of Hindustan Zinc Limited (HZL) in August 2024.

"These funds (QIP and OFS) are expected to be primarily allocated towards deleveraging, which will also lower the overall interest expenses for the entity. Further, the $500 million raised by Vedanta Resources Limited (VRL) through a stake sale in VDL in July 2024 will help reduce the Group's overall debt burden," a note by ICRA said.


Also read: Zomato shares rally 8% as JPMorgan hikes target price to Rs 340

"Consequently, the overall group leverage (total debt/OPBDITA) is anticipated to decline to 2.3-2.5 times in FY2025 and FY2026, from 3.6 times reported in FY2024, substantially strengthening the entity’s credit profile. The interest coverage is also expected to improve to 3.5-4.0 times in FY2025 and FY2026 from 2.2 times in FY2024. Additionally, VRL is looking to refinance a substantial portion of its outstanding bonds to lower the consolidated entity’s interest costs further. All the deleveraging efforts are expected to improve the overall financial flexibility of the Group," the note further added.

The shares of Vedanta have nearly doubled in the last one year while in the current calendar year, they have gained 81.7%.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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