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 assigned its ‘Crisil AA’ rating to Rs.3000 crore non convertible debentures of Vedanta Ltd (Vedanta; part of the Vedanta group) and placed it on ‘Rating Watch with Developing Implications’. Further, Crisil Ratings has continued its rating on the long term bank facilities and existing non convertible debentures of Vedanta on ’Rating Watch with Developing Implications’ and has reaffirmed its rating on the short-term bank facilities and commercial paper programme at ‘Crisil A1+’.
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 has increased to Rs. 37,529 crores during the first nine months of fiscal 2026 (against Rs.31,923 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 2026, beyond Rs. 50,000 crores, driven by better-than-expected metal prices, expected completion of ongoing capital expenditure (capex) for capacity increase and operating efficiency improvement. Notably, aluminium business is expected to ramp up production with the commissioning of BALCO smelter in Q3FY26. The projected increase in Ebitda will support the ongoing capex (~Rs 19,000- 20,000 crore in fiscal 2026, including sustaining capex) as well as scheduled debt repayment over the medium term.
The ratings also factor in material reduction in refinancing risk at VRL, with reduced external debt (reduced to ~$4.8 billion in Dec 2025 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.
The improvement in earnings along with the reduction in debt (net debt reducing to Rs 1.11 lakh crore in fiscal 2025, including VRL debt of ~Rs. 0.42 lakh crore) has led to reduction in consolidated net leverage to 2.55 times in fiscal 2025 from 3.2 times in fiscal 2024. Further, in fiscal 2026, the expected increase in Ebitda and steady net debt position should support reduction in consolidated net leverage to sustainably below 2.5 times in fiscal 2026 and thereafter. Furthermore, 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.
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.
Crisil Ratings has taken note of the final order, dated December 16, 2025, issued by the National Company Law Tribunal (NCLT) for the scheme of demerger of the Vedanta group. This order has approved the proposed scheme of demerger of the Vedanta group’s primary business verticals—aluminium, oil and gas, and iron and steel—into separate, standalone listed entities, with remaining businesses being part of the residual entity, Vedanta Ltd. Further, the order for the demerger of the Vedanta group’s power vertical was received on 9th January 2026, as anticipated.
The ratings on the debt facilities of Vedanta Ltd remain on ‘Watch developing’, because the critical and necessary information for resolution of the watch is still awaited by Crisil Ratings. This includes clarity from lenders 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. That said, Crisil Ratings will continue to monitor developments regarding the proposed organisational restructuring
Furthermore, final clarity on allocation of assets and liabilities across entities under the proposed demerger structure along with the support philosophy for each entity by the group or group companies is awaited. These factors will be critical for evaluating the final credit profiles of the entities under the proposed structure, including Vedanta Ltd, and for resolving the rating watch.
Additionally, while this NCLT order represents a significant regulatory milestone, the completion of the process remains subject to further requisite approvals. The management expects the overall demerger exercise to be concluded by March 2026.
Crisil Ratings will continue to monitor developments regarding these critical aspects including the final liability allocation, clarification on support philosophy and mechanism among the group entities. |
Analytical Approach Crisil Ratings has included debt of VRL, which is estimated at $4.8 billion (excluding outstanding intercompany loans [ICL] of $370 million) or Rs 43,200 crore as on Dec 31, 2025, 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. Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers - Strengths Significantly reduced refinancing risk at VRL 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 Crisil Ratings expects net debt to remain steady in fiscal 2026 on account of refinancing of maturities undertaken by the company. 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 Low-cost position of key businesses Higher integration to support profitability in the aluminium business over the medium term Timely commissioning of the ongoing capex without any further time and cost overruns will be monitorable to support sustained profitability increase in the aluminium segment. Strong volume growth expected with capital allocation towards the zinc, aluminium and iron ore businesses |
Key Rating Drivers - Weaknesses 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 from fiscal 2026 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 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 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 2026, which comfortably cover its term debt obligation of ~Rs 15,335 crore for the same fiscal year. Additionally, the company has a cash balance of Rs 20,085 crore as of December 31, 2025, and an unutilized bank limit of Rs 10,814 crore as of the same date. Further, the company's flexibility in capital expenditure and its ability to refinance its debt further support its liquidity.
The company’s improved financial flexibility is reflected in the timely refinancing of a significant portion of its principal debt obligation in fiscal 2026, which have now been pushed out to fiscal 2027 (~USD 3.2 bn) and 2028 (~USD 2.0 bn). Based on its track record and strong banking relationships, Crisil Ratings these 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 5,000-5,300 crore ($600-650 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.
Environment, social and governance (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
Downward 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 |
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
Criteria Details
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