·
Vedanta
Group has reduced debt by another $1.1 billion in Q1 FY27, following its
earlier reduction by $500 million in FY26
·
The
Group’s refinancing strategy is increasingly translating into lower borrowing
costs, stronger financial flexibility and greater cash available for growth and
shareholder returns
Mumbai:
As companies across the Vedanta Group emerge as focused, independent businesses
following the landmark demerger, an important part of the transformation is
taking place away from the stock market: the optimisation of their debt
through refinancing
This
is particularly relevant as the operating companies move through their
respective investment cycles, as the Group continues to benefit from strong
operational performance and cash generation across businesses.
The
latest example is Vedanta Aluminium Metal Limited (BSE: 544780 & NSE:
VAML), which is reported to be raising around ₹13,500 crore through
facilities from various banks. According to the reported transaction, the loans
are intended to refinance debt inherited from the earlier integrated corporate
structure. The reported interest rate of around 7.9 - 8% also illustrates the
significance of the company's improved access to domestic lenders. Vedanta
Limited (BSE: 500295, NSE: VEDL) entered FY27 with an industry-leading Net
Debt/EBITDA ratio of around 0.3x, while Vedanta Aluminium's ratio stood at
around 0.9x following its first quarter as an independent company.
This
is precisely one of the intended benefits of the demerger: each business can
now build a capital structure tailored to its own earnings profile,
cash-generation capacity, investment requirements and growth aspirations.
The
improving credit profile also provides an external indication of the shift in
the Group's financing position.
Vedanta Limited, Vedanta Aluminium (NSE: VAML), and Vedanta Oil and Gas (NSE:
VOGL) have since received AA+/Stable ratings from CRISIL and ICRA, while
Vedanta Iron & Steel (NSE: VISL) has received an AA/Stable rating from
CRISIL. This reflects greater visibility into their standalone businesses and
financial profiles following the demerger. The stronger ratings support access
to more competitive borrowing terms as the companies refinance existing debt.
At
the parent level, Vedanta Resources has continued to deleverage, with its FY26
results showing a net debt reduction of $500 million, followed by a further
$1.1 billion cut in Q1 FY27, taking net debt to $9.4 Billion. As a result,
Group Net Debt/EBITDA improved substantially to 1.2x in Q1 FY27, from
2.0x in March 2025. The Group ended the year with US$3.3 billion of cash and
cash equivalents, providing additional liquidity.
In
its FY26 results, the Group reported that finance costs had fallen 31%
year-on-year to US$1,485 million from 2,164 million in FY 25, primarily
driven by refinancing at lower interest rates and repayment of high-cost
debt. Vedanta Resources has repeatedly used liability management and
refinancing to extend maturities and reduce funding costs. In December 2025,
the company said Moody's had noted that liability management and debt
refinancing had reduced funding costs to below 10% in FY26 from 13% in the
previous year. More recently, S&P stated that it estimates that if the
refinancing proceeds as contemplated, it could reduce annual interest costs by
approximately US$150 million, while lowering annual maturities and
improving financial flexibility.
For
shareholders, cash saved in interest costs increases the cash available for deleveraging,
growth investments or shareholder distributions. Lower leverage also
improves capital allocation capabilities, while stronger ratings are creating a
virtuous cycle of better funding access, lower financing costs and further
balance-sheet strengthening.
Vedanta’s
leverage strategy increasingly points towards a more disciplined financial
model: refinance smarter, reduce interest costs, generate more free cash
flow, deleverage faster and create greater capacity for growth and shareholder
returns.