India Ratings revises Vedanta's outlook to 'Positive'

Vedanta (VDL) said that India Ratings and Research (Ind-Ra) has revised the company's outlook to 'Positive' from 'Stable' while affirming its long-term issuer rating at 'IND AA-'.

Ind-Ra said that the outlook revision reflects a likely improvement in the operational cash flow for FY22 and FY23 because of a significant increase in the operating profitability, led by enhanced volume performance, cost improvements across segments and a sharp recovery in metal prices.

As such, the deployment of surplus cash to address structural subordination is unlikely to result in a material increase in the gross debt, leading to an improvement in the overall net financial leverage (net debt/EBITDA).

 

Also, there is a favourable change in VDL's group structure, led by Vedanta Resources' (VRL's) increased stake of 69.7% in VDL as of November 2021 from 50.1% in November 2020. The change in the group structure will reduce the dividend cash leakages and improve the financial flexibility of the group.

Vedanta is a diversified natural resources player, with a significant presence in zinc, oil and gas, copper, aluminium, iron ore, and power. VDL generates 90% of its consolidated EBITDA from aluminium, zinc and oil and gas business.

On a consolidated basis, Vedanta reported attributable net profit of Rs 4,615 crore in Q2 September 2021, steeply higher than Rs 824 crore in Q2 September 2020. Net sales rose 44% to Rs 30,048 crore in Q2 FY22 over Q2 FY21.

The scrip fell 1.37% to currently trade at Rs 340.95 on the BSE.

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