Home / Companies / News /  RIL's decision to shelve Aramco deal won't affect its credit quality: Moody's
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Reliance Industries Ltd (RIL) decision to shelve the $15 billion deal with Saudi Aramco will not affect the conglomerate's credit quality, Moody's said on Tuesday.

"The sale would have strengthened the company's balance sheet and liquidity as it continues to incur capital spending for its digital services, and new energy and retail businesses," the ratings agency said.

After missing two self-imposed deadlines, billionaire Mukesh Ambani's RIL has shelved a proposed deal to sell 20% stake in its oil refinery and petrochemical business to Saudi Aramco for an asking of $15 billion, as the Indian firm focuses on the new energy business.

"Due to evolving nature of Reliance's business portfolio, Reliance and Saudi Aramco have mutually determined that it would be beneficial for both parties to re-evaluate the proposed investment in O2C business in light of the changed context," Reliance said late Friday, adding that it will continue to be Saudi Aramco's "preferred partner" for investments in India's private sector.

"The decision to reevaluate the transfer and the stake sale will not impact RIL's credit quality because the company already has a strong balance sheet to accommodate future investments required for its various businesses," Moody's has said.

Ambani had in company's annual general meeting (AGM) of shareholders in August 2019 announced talks to sell a 20 per cent in the oil-to-chemicals (O2C) business, which comprises its twin oil refineries at Jamnagar in Gujarat, petrochemical assets and 51 per cent stake in fuel retailing joint venture with BP, to the world's largest oil exporter.

At that time, he had announced the deal would close by March 2020. The deadline was missed and the company blamed pandemic controlling restrictions, imposed towards the end of March 2020, for hampering due diligence.

This year too, at the AGM, Ambani stated that the deal would close by the end of the year. At the same event, he also announced new energy forays, including a plan for developing one of the largest integrated renewable energy manufacturing facilities in the world.

Further, Moody's said RIL has a rating downgrade trigger of net debt/EBITDA of 3.0x, but the company reported a net cash position as of 30 September 2021. In addition, the ratings agency expects the company to generate sufficient cash flows from operations each year to fund its capital spending.

RIL's announcement to revisit its earlier plan of divesting stake in its O2C business will allow the company to reassess the interlinkages and synergies between its legacy O2C business and its new energy business that was announced recently, it said.

"This will be important as the company has a target of achieving carbon neutrality by 2035. The Jamnagar Refinery in India's Gujarat state, which houses bulk of the company's O2C assets, will also be the incubation center for its new energy business."

On Tuesday, Reliance scrip was up 1.11% to settle at 2,389.95 on NSE.

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