Vedanta: Positive news from Fitch Ratings, likely to impact stock

News Topical, Digital Desk : Fitch Ratings has changed its outlook on Vedanta Resources Ltd (VRL), the UK-based parent company of Vedanta Ltd, from 'stable' to 'positive'. The rating agency based this move on expectations of strong earnings prospects, debt reduction, and improved financial discipline. However, Fitch maintained VRL's long-term foreign currency issuer default rating at 'B+'.

What Fitch Said

In a statement issued on December 18, Fitch said, "The positive outlook reflects our estimate that VRL's proportionately consolidated EBITDA net leverage could remain at or below 3.2x over the long term, with a decline." This is a ratio that indicates how long a company can use its EBITDA to service its debt. According to the agency, this improvement is possible due to improved short- to medium-term expectations for zinc, aluminum, and silver prices, improved backward integration of VRL's aluminum business, and management's commitment to deleveraging. Fitch estimates that the zinc, aluminum, and oil and gas businesses together contributed approximately 90% of Vedanta Resources' adjusted consolidated EBITDA of approximately $5.3 billion in FY25 (April–March). Vedanta Resources currently holds a 56% stake in Vedanta Ltd. The rating agency stated that the 'B+' rating still reflects corporate governance risks, the group's complex structure, and its moderate business profile. Fitch also stated that the rating takes into account manageable liquidity risks at the holding company level, including VRL and its other offshore investment holding companies. 

What did it say about debt? As of October, Vedanta Resources had approximately $5.2 billion in debt. Fitch believes the company will meet its upcoming liabilities through dividends from its operating companies and/or refinancing, supported by improved funding access. The agency also stated that a potential sale of stakes in its listed operating companies could provide additional security. (Disclaimer: The advice or views expressed on CNBC TV18 Hindi/CNBC Awaaz are the personal views of the experts or brokerage firms; the website or management is not responsible for the same. Please consult your financial advisor or certified expert before investing.)
 

Read More: Market reforms will continue, Sebi chief said – first round completed, work on second is underway, read what are the future plans.