Vedanta Ltd., the Indian commodities giant controlled by billionaire Anil Agarwal, is preparing to issue its third rupee bond this year, seeking to raise 30 billion rupees ($360 million). This latest bond offering is part of the company's broader strategy to diversify its financing sources and capitalize on improved credit ratings.
The new bond issuance comes after significant financial maneuvering by Vedanta's parent company, Vedanta Resources Ltd. (VRL), which has been actively working to refinance approximately $5.2 billion in US dollar bonds and loans. These efforts are aimed at reducing borrowing costs, particularly after securing credit rating upgrades. VRL recently repaid loan facilities totaling $1.73 billion ($530 million due April 2025, $600 million due June 2025, and $600 million due May 2026), leading to the release of encumbrances on Vedanta shares by August 21, 2026.
In a related move, Vedanta Aluminium Metal Ltd., a newly demerged unit, is securing approximately 135 billion rupees ($1.4 billion) in local currency loans from a consortium of Indian banks including Axis Bank, HDFC Bank, and ICICI Bank. These loans, with tenors ranging from 6.5 to 7 years and interest rates between 7.9% and 8%, will refinance existing debt inherited from the previously integrated company structure. This highlights Vedanta's strategy to establish independently financed businesses for greater financial flexibility, especially after its businesses were split into five separate listed companies, with four (aluminum, power, oil and gas, and iron ore) commencing trading in June. Crisil Ratings, S&P Global's local arm, upgraded Vedanta Aluminium's rating to AA+ with a stable outlook last month, citing improved financial flexibility.
Vedanta Resources is also in discussions with global banks to comprehensively refinance its $5.25 billion to $5.5 billion holding company debt. This involves plans to raise $3.5 billion to $3.7 billion through 10-year bonds and $1.5 billion to $1.7 billion via five-year loans. The objective is to better align debt repayments with predictable dividend inflows from its operating companies, addressing past pressures from large bullet repayments during commodity downturns. Analysts from S&P Global estimate VRL's EBITDA at $7 billion in fiscal years 2027 and 2028, predicting a reduction in adjusted debt by $500 million in FY27 and $1 billion in FY28, with the ratio of funds from operations to debt expected to remain above 30% over the next 12-24 months.
