Vedanta Aluminium's next chapter begins with $1.62b refinancing

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Less than two months after beginning its journey as an independent listed company, Vedanta Aluminium is raising about ₹13,500 crore (USD 1.62 billion) from a consortium of Indian banks to refinance inherited debt, marking its first major financing initiative since the Vedanta Group's demerger.

According to people familiar with the matter, Axis Bank has signed a loan agreement worth ₹5,500 crore (USD 658.3 million) with Vedanta Aluminium Metal Ltd., while HDFC Bank and ICICI Bank will jointly lend about ₹8,000 crore (USD 84.04 million) . Axis Bank is expected to launch the process, with the participating lenders subsequently distributing a portion of the financing.

The loan carries a tenure of six-and-a-half to seven years, with interest rates expected to range between 7.9 per cent and 8 per cent. The proceeds will primarily be used to refinance debt inherited by Vedanta Aluminium following the group’s restructuring.

Representatives of Vedanta Group, Axis Bank, ICICI Bank and HDFC Bank did not immediately respond to the request for comments. 

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First major financing move after Vedanta's demerger

The refinancing comes shortly after Vedanta completed one of the largest corporate restructurings in India's metals sector, separating its businesses into five independently listed companies. The new structure, approved by an Indian court in December, saw Vedanta Aluminium Metal Limited, along with the power, oil & gas and iron & steel businesses, begin trading independently in June.

Read also: How Vedanta Aluminium emerged as the standout business following the group's demerger.

Among the newly listed companies, Vedanta Aluminium emerged as the standout performer during its market debut. The aluminium business was valued at around ₹527 (USD 5.54) per share on the BSE during the special pre-opening session, significantly outperforming the notional demerger value and attracting positive investor attention. 

Market analysts had identified the aluminium business as one of the strongest growth drivers within the demerged Vedanta portfolio, supported by capacity expansion, improving aluminium prices and long-term demand fundamentals. 

Improving financial profile supports refinancing

The fundraising also comes as Vedanta Aluminium enters a stronger financial position following its demerger.

Brokerages including ICICI Securities, CLSA, Citi, Nuvama and Emkay have maintained positive views on the company, citing higher aluminium production, ongoing capacity expansion, cost optimisation initiatives and a growing share of value-added aluminium products as key drivers of future earnings. 

Read also: How Vedanta Aluminium's expansion strategy is shifting from capacity building to higher-value products.

During the first quarter of FY27, Vedanta Aluminium reported EBITDA of ₹102 billion (USD 1.07 billion), up 135 per cent year-on-year, supported by stronger aluminium prices and higher production volumes.

Consolidated net profit more than tripled year-on-year to ₹56.29 billion (USD 591.26 million), while revenue from operations increased 46 per cent to ₹213.93 billion (USD 2.25 billion), reinforcing investor confidence as the company transitions from a capital expenditure-intensive phase towards operational growth and profitability.

ICICI Securities also expects aluminium production to grow by around 9 per cent through FY28, driven largely by capacity additions at BALCO and continued efforts to improve production efficiency while lowering operating costs. 

Credit profile strengthens as debt outlook improves

The company's improving financial position has also been recognised by credit rating agencies.

Last month, CRISIL Ratings, the Indian arm of S&P Global, upgraded Vedanta Aluminium's credit rating to AA+ with a Stable outlook, citing improved financial flexibility following the group's restructuring. 

Separately, ICICI Securities expects Vedanta Aluminium's net debt to decline to below ₹10,000 crore (USD 10.5 billion) by FY2028, supported by robust operating cash flows and lower production costs.

The refinancing also comes against the backdrop of rising corporate credit demand in India. According to Reserve Bank of India data, bank lending expanded 17.7 per cent year-on-year to ₹217.3 lakh crore (USD 228.2 billion) as of July 15, reflecting growing demand for financing to refinance debt and support business expansion. 

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