Further, the monetisation of the iron and steel assets at Vedanta, and the ability to raise funds through stake sale by its parent could reduce the need for significantly large annual dividend payouts by VDL over the near-to-medium term, the report notes.

However, the agency says VRL would continue to depend on Vedanta’s cash flows for repayment of the upcoming debt maturities. It believes any lower-than-expected cash accrual from a moderation in commodity prices, could result in a higher consolidated balance sheet debt and will remain a key monitorable.

In November last year, Crisil had downgraded the long-term bank facilities and debt instruments of Vedanta amid rising concerns about financial flexibility of the billionaire Anil Agarwal-led firm, which had already witnessed a reduction in liquidity since last fiscal. The rating also factored in the recent plan to demerge its businesses into separate listed standalone entities as well as the impending debt refinancing risk at the parent company.

Besides, S&P Global Ratings and Moody's Investors Services downgraded Vedanta Resources' ratings in the recent past. S&P Global downgraded VRL to "CCC" from "B-" on potential bond extensions and also placed it under ‘credit watch’. A CCC rating indicates higher vulnerability in meeting its financial commitments. While Moody's cut VRL’s corporate family rating (CFR) from ‘Caa1’ to ‘Caa2’, citing elevated risks of debt restructuring.

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