Crisil optimistic, S&P sombre on RIL's bid

Credit rating company Crisil has maintained a stable outlook on Reliance Industries Ltd, reaffirming its ratings on the debt instruments and bank facilities. This is after RIL’s announcement on its preliminary non-binding bid for the acquisition of LyondellBasell Industries (LBI).

Standard & Poor’s has, however, reaffirmed its negative rating, stating that the consolidated financial metrics of the company could weaken over the next 12 months if it proceeded to acquire Netherlands-based Lyondell S&P said the transaction could bring some strategic benefits but with limited synergies. “The acquisition would weaken Reliance Industries’ metrics, even after factoring in the company’s cash and cash equivalent of about $4 billion as at September 30.

However, we believe its financial risk profile could change if competitive bidding from other interested companies increases the bid price, or the company sells some of its treasury stocks,” said Standard & Poor’s credit analyst, Yasmin Wirjawan.Crisil reaffirmed its rating based on its discussions with RIL’s management, wherein the company stated that RIL’s majority ownership in LBI will be funded without any additional debt on the books of RIL or that of its consolidated group companies. Existing cash and sale of treasury stock will be used for funding the acquisition. After the acquisition, LBI will have a conservative capital structure, with its gross debt to equity ratio not exceeding 0.75, and no additional support would be required from RIL.