Bank of America Maintains Positive View on Vedanta Resources Securities

Bank of America (BofA) Global Research has maintained a positive recommendation on securities issued by Vedanta Resources Ltd. (and its subsidiary Vedanta Resources Finance II PLC), citing reduced holding company liquidity risk, cheaper debt, and lower reliance on dividends in the future. The firm’s report follows allegations by a US-based short seller against the Vedanta Group, which the conglomerate has strongly rejected.

BofA has noted that a recent third-party report (Viceroy report) reiterated Vedanta Resources Ltd.’s (Holdco) known structural subordination, reliance on dividends to service debt, and changes in senior management.

“Even so, the holding company’s liquidity risk has been reduced with a reduction in its debt to USD 5.3bn by end of financial year (FY) 2025, driven by dividends from its majority-owned Vedanta Ltd, and a ~12% stake sale in the latter (ownership reduced to 56.4% as of FY25), and lower repayments (USD450-650mn per annum) over the next three years”, the firm said. It also noted the moderation in interest cost at Vedanta Resources to ~11% in fiscal 2026, compared to ~14% in the last financial year (FY25).

BofA estimates that there will be a reduction in Vedanta Resources Ltd.’s debt servicing needs. “We estimate the holding company’s FY26 debt service need will reduce to USD 1.1 billion, compared to USD 1.8 billion in FY25. Also, the dividends requirement will be lower at ~USD800-900mn in FY26,” the firm said in its report. Vedanta Resources had raised $485 million by selling 2.63% in Vedanta Ltd. during FY25.

While Vedanta Resources continues to focus on deleveraging, free cash flow at its subsidiary Vedanta Ltd. is also expected to improve. BofA expects Vedanta Ltd’s higher free cash flow to reduce dependence on debt and stake sales. 

“The higher free cash flow will be led by FY26 EBITDA of USD 5.5 billion, up by USD 0.5 billion YoY on higher volumes, and an increase in aluminium/silver price, partly negated by lower zinc/ oil price, per our estimates,” the firm said, adding that any reduction in production cost will be further cash accretive for the company.

And so, BofA has said that the yield curve on securities issued by Vedanta Resources/its subsidiaries looks attractive. “Vedanta Resources Finance II PLC curve looks to us attractive compared to regional and emerging market (EM) peers,” BofA said.