New Delhi: Global credit rating agency Moody’s Investors Service has affirmed a medium investment grade rating to Mukesh Ambani-led Reliance Industries with a stable outlook for its “well-established” production facilities and “globally competitive” refining operations.
RIL has been affirmed the ‘Baa2’ issuer and senior unsecured rating with stable outlook, a Moody’s statement said.
“The Baa2 rating reflects RIL’s well-established and integrated production facilities and its globally competitive refining operations, which command higher margins relative to many of its competitors,” Moody’s senior vice-president Terry Fanous said.
The rating also recognises RIL’s moderate financial leverage and its substantial operating cash flow generation, Fanous added.
The ratings reflect RIL’s sizable expansionary plan, which requires high capital investment and entails execution risk, and its exposure to single-site complex -- where most of its operations are located, the statement said.
RIL’s rating could be upgraded if it demonstrates a continued track record in maintaining its “currently strong” financial profile as it executes its expansion plan so that its scale and diversity strengthens, it added.
On the other hand, the rating would experience downward pressure if RIL undertakes aggressive debt-funded capital investments or acquisition plans and returns cash to shareholders beyond its dividend payout policy of 20%-25%, and if RIL’s profitability deteriorates due to weakening operating environment.
However, Moody’s said RIL is well positioned in the Baa2 rating, which assumes that the company’s investments would be made in a manner that would not materially weaken its financial profile.
RIL’s operating cash flow generating capacity would be materially enhanced over the next 12-24 months after the planned commissioning of the new Jamnagar greenfield refinery and the domestic gas project. At the same time, the company has plans to undertake substantial investments in refining, petrochemicals, exploration & production, and retail sector, the rating agency added.
RIL is a leading domestic oil refining and petrochemical company, with a growing business in oil and gas exploration and production. It generated sales revenue of Rs1,137.7 billion for the year ended March 31, 2007.