Crisil upgrades Vedanta's long-term debt rating to 'AA/Stable'

Crisil has upgraded its rating on the long-term bank facilities and debt instrument of Vedanta Limited to 'AA/Stable' from 'AA-/Positive'.
It also reaffirmed 'A1+' rating on the company's short- term debt and assigned 'AA/Stable' rating to Rs 3,010 crore preference share issue of Vedanta.
"The upgrade reflects better than expected operating performance and Crisil's expectation of a meaningful deleveraging of balance sheet with access of Cairn India Ltd's cash," Vedanta Ltd said in a statement.
Improvement in operating performance is being driven by production ramp-up of zinc, aluminium, and iron ore and continued focus on reducing production cost.
"The aluminium business benefits from higher ramp up of smelters as reflected in annualised run rate of 1.4 million tonnes for quarter four of fiscal 2017 and lower power cost," the statement said.

Zinc business continues to benefit from ramp up of underground mine, efficient and integrated operation.

Additionally, stable commodity prices should support better-than-expected cash flow.
"Crisil expects significant reduction in gross debt over fiscals 2018 and 2019. Consequently, Crisil expects that the company's net debt to EBITDA is likely to improve to around 2 -2.2x times on a sustainable basis by end of fiscal 2018.
"A sustainable improvement means that the higher EBITDA should be driven by improved cost efficiencies and increased volumes, rather than increase in commodity prices," it said.
The recent re-structuring/re-payment of debt undertaken by the company along with plans to undertake further liability management in fiscal 2018 will significantly reduce the re- financing risk, it added.

Additionally, access to Cairn India's cash has further helped to reduce refinancing risk, it said.
For arriving at the ratings, Crisil has combined the business and financial risk profiles of Vedanta, Hindustan Zinc, the group's zinc business in Namibia, South Africa, and Ireland, Bharat Aluminium Company and Copper Mines of Tasmania Pty (CMT).
All the entities are Vedanta's subsidiaries, operate under a common management, and have operational and financial linkages.
"Crisil has included Vedanta Resources Plc's (Vedanta Resources; rated 'B+/Stable' by S&P Global Ratings) debt of about Rs 37,500 crore in the capital structure analysis of Vedanta," the statement said.

The Vedanta group is owned majorly by Vedanta Resources, a metal, mining, power, and oil-and-gas company listed on the London Stock Exchange.