Moody's affirms Reliance Industries' rating with a stable outlook

Rating agency Moody’s on Thursday affirmed Reliance Industries’ (RIL’s) rating with a stable outlook. The rating reflects significant improvement in RIL’s scale and business mix over the past two years, the agency said.

“Moody’s Investors Service has affirmed RIL’s Baa2 domestic long-term issuer rating and foreign currency senior unsecured rating. At the same time, it has affirmed the Baa2-backed domestic currency senior unsecured debt ratings on the USD denominated bonds issued by Reliance Holding USA, with a guarantee from RIL,” it said in its statement.

The company reaps benefits from investments over the past five years in its hydrocarbon and consumer businesses, the agency said. The rating also incorporates the company’s diversification benefits arising from its exposure to refining, petrochemical, and telecom sectors, among others.

“Given the change in RIL's business mix, Moody's no longer views RIL as only an oil refining and marketing company but a mix of diverse businesses,” Moody’s said in its statement Moody's expects that by FY2022, the hydrocarbon businesses will only account for about 50 per cent of RIL’s consolidated Ebitda.

On RIL’s exposure to India through its consumer business, Moody’s said: “RIL’s ratings will be constrained to no more than one notch above the sovereign rating, given the increase in its  dependence on the Indian economy through its consumer businesses.”

The report added concerns for RIL over India’s initiative to reduce single-use plastic consumption. Moody’s, however, said: “This risk is largely mitigated by RIL's diverse petrochemical business, which not only produces plastics with advanced applications, but also elastomers and polyester yarns and fibers.”

The agency also expects RIL’s planned stake sale in its oil to chemicals division to further ease debt pressures. On August 12, RIL announced signing a non-binding letter of intent to sell a 20 per cent stake in its oil-to-chemical (O2C) business to Saudi Aramco. The company also entered into a deal with BP Plc to sell a 49 per cent stake in its fuel marketing business in India for $1 billion. “Proceeds from these transactions will result in a $16-billion reduction in RIL’s net debt,” the agency said.

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