Vedanta Limited
Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. 1 crore = 10 million Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale Crisil Ratings has continued its rating on the long-term bank facilities and non convertible debentures of Vedanta Limited (Vedanta; part of the Vedanta group) and has reaffirmed its rating on the short-term bank facilities and commercial paper programme at ‘Crisil A1+’.
Furthermore, Crisil Ratings has withdrawn its rating on the non-convertible debentures (NCD) of Rs. 6,089 crores. The withdrawal is due to the eventual transfer of these NCDs to Vedanta Aluminium Metal Ltd (VAML; part of the Vedanta group), post-demerger of the Vedanta group. VAML will operate the aluminium business of the group post demerger.
Crisil Ratings has taken note that on 20th April, 2026, the board of Vedanta Ltd approved the effective date of the demerger scheme as May 1st, 2026. This is after the final order, dated December 16, 2025, issued by the National Company Law Tribunal (NCLT) for the scheme of demerger of the Vedanta group (order for the demerger of the Vedanta group’s power vertical was received on 9th January 2026). Management expects that the separate business verticals will be listed by Q2FY27.
Crisil Ratings has received clarity on allocation of liabilities across entities under the demerger structure, which was critical to evaluate the financial profiles of all entities post demerger.
However, the ratings on the debt facilities of Vedanta Ltd remain on ‘Watch developing’, because the other critical and necessary information for resolution of the watch is still awaited by Crisil Ratings. This includes clarity on the final bifurcation of the rated facilities that will be transferred to the demerged entities, from Vedanta Ltd, pursuant to the demerger. Since the credit risk profile of demerged entities may differ from each other, clarity on the movement of the rated facilities will be essential to resolve the rating watch. Based on the current understanding, Crisil Ratings expects likely rating action to be not more than a notch. Furthermore, Crisil Ratings is awaiting clarity on the support philosophy for entities in the Vedanta group, as well as the philosophy towards managing VRL’s outstanding debt in the form of dividends, brand fees, and management fees from Indian operating companies that will be split across the demerged entities under the demerged structure. This clarity would be essential for determining Vedanta’s final analytical approach in a post-demerger structure, and for resolving the rating watch. That said, Crisil Ratings will continue to monitor developments regarding the organisational restructuring.
The ratings continue to factor in the strong business risk profile of Vedanta, driven by its presence across commodities, cost-efficient operations in the domestic zinc, aluminium and oil and gas businesses, and improving capital structure. These strengths are partially offset by large debt repayment, substantial capex and dividend payouts, and susceptibility to volatility in commodity prices and regulatory risk. Furthermore, the rating factors in the overall improvement in the credit profile with better financial flexibility by increasing operating cash accrual and reducing debt, especially at Vedanta Resources Ltd (VRL; rated ‘B+/Positive‘ by S&P Global Ratings).
The company’s consolidated Ebitda improved substantially to Rs.55,976 crores during fiscal 2026 (against Rs. 43,541 crores in the corresponding period last year), supported by favourable prices and cost reduction through various initiatives, especially in the aluminium and zinc businesses. Ebitda is expected to further improve in fiscal 2027, driven by healthy metal prices, expected completion of ongoing capital expenditure (capex) for capacity increase and operating efficiency improvement.
The improvement in earnings along with the reduction in debt (net debt reducing to Rs 1.11 lakh crore in fiscal 2026, including VRL debt of ~Rs. 0.46 lakh crore) has led to reduction in consolidated net leverage to 1.98 times in fiscal 2026 from 2.55 times in fiscal 2025. Further, in fiscal 2027, the expected increase in Ebitda and steady net debt position should support reduction in consolidated net leverage to sustainably below 2.5 times and thereafter. Moreover, the ratings have factored in reduced borrowing costs for Vedanta for incremental debt raised since the second half of fiscal 2025 (from the levels seen in the second half of fiscal 2024), and this is likely to witness further reduction, going forward, with the company’s ongoing fund-raising plans. The expected reduction in the cost of borrowings, along with continued fundraising by Vedanta in a timely manner, will be monitorable.
The ratings also factor in material reduction in refinancing risk at VRL, with reduced external net debt (reduced to ~$4.9 billion in March 2026 from $5.6 billion as of March 2024) as well as lower annual maturities (to be less than $1 billion per annum) and reducing annual interest obligation. This has also been supported by recent bond refinancing activities by VRL. The said reduction in interest cost and annual maturities of VRL is expected to result in significantly lower dividends from fiscal 2026 onwards. This, along with higher operating profitability, will aid Vedanta’s free operating cash flow (post dividend and capex) as well as liquidity to increase materially from this fiscal onwards and will remain a key monitorable.
Crisil Ratings has also taken note of the promoter’s stated commitment towards continued debt reduction. This has also been reflected through various fundraising activities such as qualified institutional placement (QIP) and offer for sale (OFS) by Vedanta as well as stake sale by the parent, VRL, which has supported debt reduction last fiscal.
The rating watch continues to factor in the impending demerger of Vedanta’s aluminium, oil and gas, power and iron and steel businesses into separate standalone listed entities, with base metal (zinc international and copper business) now being part of the residual entity. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of Vedanta and its subsidiaries, collectively known as the Vedanta group, considering their operational and financial linkages. Key subsidiaries include Hindustan Zinc Ltd (HZL, ‘Crisil AAA/Stable/Crisil A1+’); the group's zinc business in Namibia and South Africa (termed zinc international); Bharat Aluminium Company Ltd (Balco; 'Crisil AA/Stable/Crisil A1+); Talwandi Sabo Power Ltd (‘Crisil AA (CE)/Watch Developing/Crisil A1+ (CE)’); and ESL Steel Ltd (‘Crisil AA/Watch Developing/Crisil A1+’). Crisil Ratings has included net debt of VRL, which is estimated at $4.9 billion (excluding outstanding intercompany loans [ICL] of $217 million) or Rs 46,377 crore as on Mar 31, 2026, to calculate the adjusted debt. This is because despite no legal recourse of VRL’s debt holders to Vedanta, debt servicing by the parent will depend on the dividend outflow from Vedanta or refinancing, based on the implicit strength of the investments held by VRL, primarily Vedanta.
Buyer’s credit/supplier’s credit has been classified as debt.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation |
Key Rating Drivers - Strengths Expectation of strong increase in consolidated operating profitability Vedanta’s consolidated operating profitability (Ebitda, excluding brand and management fees to VRL) increased to an all-time high of Rs. 55,976 crore in fiscal 2026 (Rs 43,541 crore in fiscal 2025) driven by a record-high commodity prices, as well as volume growth in the aluminium segment, and improved cost efficiencies in zinc and aluminium. While strong metal demand and increasing capacities supported volume growth, metal prices also improved in fiscal 2026, supported by improving global demand, especially from China. Aluminium prices increased by 10% year on year, while zinc prices increased by 3% year on year, on an already high base.
Notably, silver prices grew 75% to 53.1 $/oz, driven by increased industrial use mainly in solar panels, electric vehicles, electronics etc and investors demand, and further aided the earnings of the company.
The company also has strong asset base and is undertaking growth and efficiency improvement capex in multiple segments, especially in aluminium and zinc. This will further support margin profile and Ebitda levels over the medium term. The expected increase in annual Ebitda will support increased cash accrual necessary to support ongoing capex and debt reduction. Given the volatile nature of commodity prices, sustenance of continued ramp up in Ebitda to expected annual levels will be a key rating sensitivity factor.
Significantly reduced refinancing risk at VRL VRL has witnessed significant reduction in net debt over the past two fiscals, to ~$4.9 billion as on Mar 31, 2026, from $8.9 billion as on March 2022. This has been supported by large dividend payout by Vedanta over the past 2-3 fiscals, as well as fund raise through stake sale of Vedanta by VRL. Furthermore, post the liability management exercise in January 2024, VRL has witnessed elongation of its debt tenure. VRL also undertook timely refinancing of its obligations during the previous fiscal, wherein ~$3.1 billion bonds were refinanced, with tenures of 5-7 years, along with reduced cost of borrowings. Henceforth, VRL’s annual principal debt maturities are expected to be $500-550 million during fiscal 2027 (~$200 mn of principal due in Q1FY27, and $217 mn due in Q1FY27 in the form of ICL), and $550-770 million per annum over fiscals 2028 and 2029. Moreover, annual interest expense is expected to be $500-550 million per annum (at current cost). Crisil Ratings expects the said annual interest expense and debt maturities hereon to be largely managed by annual brand and management fee and materially reduced annual dividend outflow by Vedanta. In case of any open refinancing risk at VRL, Crisil Ratings expects it to be materially low and should be refinanced in a timely manner.
Furthermore, VRL’ demonstrated ability to raise funds by stake sale during the current fiscal, along with its existing shareholding in Vedanta being comfortably higher than 50% (currently at ~56%), and the group’s track record of successful refinancing provide comfort and flexibility towards VRL’s refinancing requirement. That said, timely closure (more than 6 months in advance) of any refinancing risk either at VRL or Vedanta will remain key monitorable.
Reducing debt levels to support deleveraging and improve financial flexibility The promoters and group management have been articulating about increased focus on deleveraging balance sheets at VRL as well as at operating levels. This commitment has been reflected in recent fundraising events such as QIP and OFS by Vedanta and stake sale by VRL, which have resulted in cumulative fundraising of $1.9 billion by the group during April-August 2024. This has supported reduction in net debt levels at VRL (already reduced to $4.9 billion as of March 2026 from $5.6 billion in March 2024 and $8.9 billion in March 2022) as well as at the operating company levels. Resultantly, consolidated net debt has reduced to Rs 1.1 lakh crore as of March 2026, which had increased by more than Rs 20,000 crore during the past two fiscals to reach net debt of Rs 1.18 lakh crore as of March 2024.
Expected reduction in debt levels will be a key monitorable as, along with improved Ebitda levels, it is expected to sustainably reduce net leverage to below 2.5 times.
Diversified business risk profile The Vedanta group operates across various businesses spanning zinc, lead, silver, aluminium, oil and gas, iron ore, power and steel. The group is among the largest producers in all these segments, thus commanding a strong position in the domestic market. A well-diversified business risk profile cushions the group against commodity-specific risks and cyclicality.
Low-cost position of key businesses The domestic zinc, lead and silver businesses are supported by low cost of production, large reserves and continued resource addition. Profitability in the oil and gas business is aided by low operating cost and a business model that ensures recovery of capex. Furthermore, the aluminium business has witnessed improvement in profitability since the last fiscal and is currently operating in the top quartile of global cost curves for primary aluminium producers. The cash flow will be driven by capex-led growth in volume as well as cost efficiencies over the medium term.
Higher integration to support profitability in the aluminium business over the medium term The company has increased its Aluminium smelter capacity from 2.4 million tonne per annum [MTPA] to 2.8 MTPA in fiscal 2026, which is further expected to rise to 3 MTPA by fiscal 2028 through debottlenecking measures. The company has also enhanced its level of backward integration through alumina refinery expansion to 5 MTPA, which is expected to support a sustained decline in cost of production. In addition, the company is undertaking capex to increase its share of value-added products from 1.4 MTPA to 2.6 MTPA, along with commissioning captive coal and bauxite mines over the next 1–2 years. While the smelter capacity expansion will increase the overall volume base, the higher share of value-added products will support better product premium over London Metal Exchange (LME) aluminium prices, thereby strengthening margins. Moreover, the ongoing conflict in West Asia has led to historically high LME prices, which are expected to remain in the range of $2,800–3,000 per tonne over the medium term.
These factors together are expected to improve the resilience of EBITDA per tonne, enabling it to sustain above $1,000 per tonne in fiscal 2027 and beyond. EBITDA per tonne increased to $1,171 in FY26 ($872 in fiscal 2025, $494 in fiscal 2024, and $322 in fiscal 2023). This improvement was primarily driven by higher aluminium LME prices, lower power costs due to improved materialisation of linkage coal and a decline in coal prices, along with the benefits of increasing alumina refinery capacity to 5 MTPA from 2 MTPA.
That said, timely commissioning of the remaining capex, without any further time and cost overruns, will remain monitorable to support sustained profitability improvement.
Strong volume growth expected with capital allocation towards the zinc, aluminium and iron ore businesses Increased mined metal capacity in domestic zinc, along with ramp-up of Gamsberg’s (South Africa) operations in zinc international, will support the scale-up in volume. Furthermore, Vedanta has commissioned its brownfield expansion of its aluminium smelter capacity (435 KTPA addition in BALCO) and increasing its level of integration by expanding its refinery (already commissioned), commissioning of captive coal mines and increasing the share of value-added products. All these projects are expected to be commissioned in a phased manner by fiscal 2027. In addition, Crisil Ratings understands that the company will be increasing its iron ore capacities (domestic as well as overseas) over the next 1-2 years, which would further support volume growth. While the company had been looking to divest its steel business in the past to support deleveraging, Crisil Ratings understands that no binding sale agreement has been executed, which will be monitorable. |
Key Rating Drivers - Weaknesses High outstanding debt (including VRL); though expected to improve going forward Vedanta has had high debt levels over the past few fiscals on account of large debt of its parent. This has increased even more on account of continued assistance through dividend payout to the parent to support the latter’s debt servicing. Consequently, net leverage continued to remain high at 3.2 times as of March 2024 and 3.4 times in March 2023. That said, with the recent fundraising by the group through stake sale by VRL, QIP and OFS by Vedanta, deleveraging at VRL and increase in operating profitability, consolidated net leverage has reduced to ~ 1.98 times as of March 2026 and will remain sustainably below 2.5 times in fiscal 2027 and thereafter.
Also, repayment of high-cost borrowings is expected to result in reduced interest expense which, along with expected material reduction in annual dividend outflow (as VRL’s debt servicing requirements reduce from fiscal 2026), will improve operating cash accrual and, in turn, support reduction in net leverage to sustainably below 2.5 times and improvement in other debt coverage metrics in fiscal 2027 and thereafter. Thus, expected reduction in consolidated gross and net debt (including debt at VRL) should support the financial flexibility of both Vedanta and VRL over the medium term, and will be monitorable. Any change or delay in these expectations will be a key rating sensitivity factor.
Sizeable planned annual capital outlay The company has been incurring sizeable capex over the past fiscals (Rs 16,000 crore in fiscal 2023, ~ Rs 11,000 crore in fiscal 2024, Rs. 17,746 crores in fiscal 2025), with Rs 19,000-20,000 crore estimated in fiscal 2026 (including sustaining capex), funded through a mix of debt and internal accrual. The said capex is mainly towards capacity expansion as well as efficiency and product mix improvement across multiple businesses. Once completed, the same is expected to materially improve the operating earnings base from the current fiscal, especially with the commissioning of smelter and refinery capacities in the aluminium business by the third quarter of fiscal 2026. That said, profitability remains susceptible to volatility in the prices of metals and oil and gas. Any further delay in ramp-up of annual Ebitda against expectations, material acquisition or higher-than-expected cash outflow to support VRL will remain monitorable.
Crisil Ratings also understands that the proposed capex for the semi-conductor and display production businesses (after calling off the joint venture with Foxconn) will now be executed under Vedanta. However, the management has articulated that the project is at a nascent stage and there will be no immediate capital outlay towards it. Progress in the semiconductor business will depend on identification of a new technology partner and various regulatory approvals, including the production-linked incentive scheme, which are monitorable.
Furthermore, Crisil Ratings understands that the capex requirement for the Konkola Copper Mines Plc (KCM) business is expected to be ~ $1bn till fiscal 2030. However, the same is not to be undertaken at Vedanta level and will be through a mix of internal accrual and debt. Further, Vedanta Limited may continue to provide dividends to the parent, even post demerger, to support the capex requirements. Further developments in this regard will remain monitorable.
Susceptibility to changes in regulations The businesses are vulnerable to regulatory risk. The copper smelting plant at Thoothukkudi in Tamil Nadu has been shut since May 2018 following a directive from the Tamil Nadu Pollution Control Board. Suspension of the iron ore mining operations in Goa and Karnataka in the past have adversely impacted the iron ore business. Furthermore, the March 2021 order of the Delhi High Court on profit sharing contract (PSC) extension, ruling against the company, has reduced profit margin for the oil and gas business.
Vedanta is also exposed to the recent ruling by the Supreme Court of India in August 2024, wherein the court upheld the state government’s right to tax mineral rights and mineral bearing lands on the retrospective basis, from April 2005. However, payments will be spread over 12 years, starting from April 1, 2026. Additionally, interest and penalties on demands for the period before July 25, 2024, will be waived. Crisil Ratings understands from the management discussion that the current contingent liabilities for Vedanta and its subsidiaries, basis the demands raised so far, is limited and not material. However, the states are yet to come out with their final decision on imposition of such retrospective tax. Crisil Ratings will monitor the developments on this matter and will assess the final implication as and when final clarity emerges. |
Liquidity Strong Vedanta's liquidity is supported by expected cash accruals of over Rs 30,000 crore in fiscal 2027. Additionally, the company has a cash balance of Rs 28,485 crore as of March 31, 2026, and an unutilized bank limit of Rs 10,814 crore as of the same date, which should support the company’s term debt payments during the period. Further, the company's flexibility in capital expenditure and its ability to refinance its debt further support its liquidity.
Based on its track record and strong banking relationships, Crisil Ratings the company’s maturities to be refinanced in a timely manner as well, at least 3-6 months ahead of schedule.
Furthermore, the parent continues to depend on Vedanta for its debt servicing, including annual interest expense of Rs 4,750-5,300 crore ($500-550 million) towards its outstanding debt, as VRL does not have any operations. VRL services it mainly through dividend received from Vedanta and partly through management and brand fees. While dividend outflow from Vedanta is expected to materially reduce over the medium term, Crisil Ratings expects brand and management fee and routine dividends to cover majority of the debt obligation of VRL from the next fiscal, as VRL’s debt obligation reduces with reducing debt and refinancing at lower rate of interest, leaving limited risk of refinancing. However, Crisil Ratings expects VRL to refinance it in a timely manner as the financial flexibility of the company has improved with improved earnings outlook for operating companies. Any delay in expected timelines for required refinancing (more than 6 months in advance) or future debt servicing will be a key rating sensitivity factor. |
ESG Profile Vedanta has a dominant position in the metals and mining sector and has diversified its business risk profile with presence across multiple commodities such as zinc, aluminium, oil and gas, and iron ore. However, for the ESG assessment, Crisil Ratings has evaluated Vedanta’s top three business segments (zinc, aluminium, and oil and gas) which, on a combined basis, contribute more than 90% to the consolidated operating profit.
The ESG profile supports the existing credit risk profile of Vedanta. The metal and mining sector has a significant impact on the environment owing to high greenhouse gas (GHG) emissions, waste generation and water consumption. This is because of the energy-intensive manufacturing process and its high dependence on natural resources such as coal. The sector also has a significant social impact because of its large workforce across its operations and value chain partners, and as its operations affect the local community and involve health hazards.
Key highlights
There is growing importance of ESG among investors and lenders. The commitment of Vedanta to ESG principles will play a key role in enhancing stakeholder confidence, given its high share of market borrowing in its overall debt and access to both domestic and foreign capital markets (mainly by VRL). |
Rating sensitivity factors Upward factors
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About the Company VRL holds 56.3% stake in Vedanta and has diversified operations across the metals, mining, power, and oil and gas segments.
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Key Financial Indicators*
*Crisil Ratings-adjusted numbers **based on the audited financial statements of the company |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure - List of Entities Consolidated
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##Non-fund-based limit of Rs 2000 crore is interchangeable with fund-based limit
*Capex Letter of credit limit is interchangeable with operational Non Fund based Limit
Annexure: List of instruments and names of regulators of the instruments As required by SEBI CRA Circular dated Feb 10, 2026, a list of activities or instruments falling under the purview of various FSRs, along with the names of respective FSRs, is being disclosed below:
* Includes securitisation transactions involving assignee payout, acquirer's payout. ~ The rated instrument may involve issuance of different instruments such as debt securities (listed or otherwise), bank loans, commercial paper (listed or otherwise), etc. The regulator of the instrument may accordingly be SEBI, RBI or MCA and can only be determined upon issuance. In PRs subsequent to issuance(s), Crisil Ratings Limited shall separately capture the rated quantum details along with names of respective regulators. ^ Includes bank facilities such as liquidity facility, second loss facility that are part of securitisation transactions. # There is no instrument being rated and hence, Regulator of the Instrument is not applicable. The rating scale and definitions are being followed as stipulated in SEBI Master Circular for CRAs. @ These ratings were assigned during regulatory regime prior to introduction of SEBI CRA Circular dated Feb 10, 2026 and the investor side regulators have accordingly been included.
Note: Kindly note that for activities or instruments falling under the purview of FSRs other than SEBI, the grievance/dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available. |
Criteria Details
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