Fitch affirms gas utility GAIL India at BBB-minus with negative outlook

Fitch Ratings has affirmed GAIL India Ltd's long-term foreign-currency issuer default rating at BBB-minus with a negative outlook.

The utility's rating is capped at the same level as Indian sovereign rating (BBB-minus/negative) based on Fitch's government-related entities rating criteria, and the negative outlook reflects the outlook on sovereign rating.

"We assess GAIL's standalone credit profile at 'bbb' supported by its dominant market position in the regulated gas-transmission business, diversification into other business segments and healthy credit metrics," said Fitch.

EBITDA is expected to increase by 30 per cent in the financial year ending March 2022 (FY22) after dropping by 6 per cent in FY21.

This is based on forecast for a 6 per cent rebound in India's domestic natural-gas consumption (FY21: minus 5.5 per cent).

"We also expect higher dividend pay-outs and ongoing capex to cause net debt/EBITDA to rise to 1.8x in FY24 from 1.1x at FY21, though remaining commensurate with GAIL's standalone credit profile," said Fitch.

GAIL is India's largest gas transmission and gas marketing company with a 13,340 km gas pipeline network and capacity of 204 million metric standard cubic metres a day.

Its natural gas pipeline network covers 19 states and it has also increased its integration across the natural gas value chain in downstream segments like petrochemicals, liquefied petroleum gas and other liquid hydrocarbons.