Fitch affirms Indian Oil at BBB- with stable outlook

Fitch Ratings on Tuesday affirmed Indian Oil Corporation's (IOC's) long-term foreign currency issuer default rating at BBB- with stable outlook.

The agency also affirmed IOC's senior unsecured rating and the ratings on its outstanding senior unsecured debt at BBB-. "Fitch equates IOC's rating with that of its largest shareholder, the state of India (BBB-/Stable) based on Fitch's government-related entities rating criteria," it said in a statement.

IOC's standalone credit profile of BB+ reflects its dominant market position in India where it is the largest oil refining and marketing company, the average-but-improving complexity of its refining assets, its improving diversification and cyclical nature of the industry.

The strength of IOC's business profile offsets its moderate financial profile and negative free cash flows over the next few years on account of high capex requirements, said Fitch.

IOC's strong liquidity is reflected in its large holding of cash and equivalents of about Rs 12,200 crore including oil bonds at FYE19 against long-term debt maturities of Rs 4,500 crore in FY20.

In addition, the company has large unutilised domestic cash credit limits of nearly Rs 7,550 crore at FYE19 and unutilised revolving lines of credit of 3.5 billion dollars, said Fitch's Primary Analyst Muralidharan R. IOC also enjoys ready access to domestic and international capital and banking markets, he said.