Vedanta Oil and Gas shares in focus as CRISIL upgrades long-term credit rating to 'AA+'

Shares of Vedanta Oil and Gas (VOGL) are likely to remain in focus after CRISIL Ratings upgraded the company's long-term credit rating to 'CRISIL AA+' from 'CRISIL A+' and assigned a 'Stable' outlook, following the completion of the demerger of Vedanta Ltd.'s businesses.

The rating agency also removed the rating from 'Rating Watch with Developing Implications', citing greater clarity on the Vedanta group's support framework for its businesses after the demerger.

CRISIL upgraded the rating on ₹670 crore of long-term bank facilities to 'CRISIL AA+' from 'CRISIL A+' with a Stable outlook. It also migrated the ratings on ₹330 crore of bank facilities to 'CRISIL AA+/CRISIL A1+' from the earlier credit-enhanced ratings of 'CRISIL AA (CE)/CRISIL A1+ (CE)'.

In addition, the rating agency withdrew ratings on ₹90 crore of short-term bank facilities and ₹15 crore of long-term fund-based facilities after receiving a no-objection certificate from the lender, in line with its withdrawal policy.

Rating upgrade mechanism

According to CRISIL, the rating upgrade reflects a change in its analytical approach to assessing the Vedanta group. The agency said it has adopted a group notch-up framework, which takes into account the management's stated intent to continue operating its businesses as an integrated group with financial flexibility available across entities to support weaker businesses, if required.

The upgrade also follows the completion of Vedanta Ltd.'s demerger, which has provided greater visibility on the ownership structure and the group's financial support philosophy for the newly separated businesses.

It must be noted that following the demerger of Vedanta, effective May 1, 2026, the discontinued operations of the met coke and Nicomet businesses of the erstwhile MALCO Energy Ltd have been transferred to VISL (holding the iron and steel undertaking of the group) and Vedanta, respectively.

Conversely, Vedanta’s oil and gas operations have been transferred to VOGL. The parent company is now a 56.4% subsidiary of VRL.

Other key points

The rating upgrade factors in VOGL's stronger business and financial risk profiles, following the transfer of Vedanta's oil and gas undertaking into the company pursuant to the demerger.

"As one of India’s largest private-sector oil and gas producers, VOGL operates in 44 blocks with acreage exceeding 47,000 square kilometres and production of approximately 87 kilo barrels of oil equivalent per day (kboepd) in fiscal 2026. The business benefits from a healthy reserve base, established producing assets and a competitive operating cost structure," CRISIL Ratings said.

The company's portfolio is anchored by its Rajasthan assets, which account for more than 80% of production. The company's operating efficiency remains strong, supported by first-quartile operating costs and the production-sharing contract (PSC) framework, which ensures cost recovery before profit sharing. VOGL also continues to undertake exploration programmes, which are expected to support production sustainability and reserve replacement over the medium term.

CRISIL Ratings also notes that while the company maintains a strong market position and healthy operating efficiency, the gradual decline in production volumes over the past few years remains a key monitorable.