Moody's affirms Reliance Industries' Baa2 ratings with 'stable' outlook

Moody's Investors Service on Thursday affirmed Reliance Industries Ltd's (RIL's) Baa2 domestic long-term issuer rating and foreign currency senior unsecured rating. At the same time, Moody's affirmed the Baa2 backed domestic currency senior unsecured debt ratings on the dollar-denominated bonds issued by Reliance Holding USA Inc with a guarantee from RIL. The outlook on the ratings above is stable.

"The ratings affirmation reflects the significant improvement in RIL's scale and business mix over the last two years, as it reaps the benefits from its investments over the last five years in its hydrocarbon and consumer businesses," said Moody's Senior Vice President Vikas Halan.

"The affirmation also incorporates our expectation that RIL's credit metrics will remain appropriate for its Baa2 ratings over the next 12 to 18 months, as the company has completed its investment cycle and will start reducing its borrowings through higher earnings," he added.

Over the past five years, RIL has spent Rs 360 crore on increasing its refinery complexity, expanding its petrochemical capacity, building its digital services business and expanding its retail business.

In addition to the improved efficiency and scale of the legacy refining and petrochemical segments, RIL has also added highly resilient digital services and retail segments into its business mix.

RIL's Jamnagar refinery complexity increased to 21.1 as of March 2019 from 12.7 as of March 2018. Its petrochemical production also increased to 37.7 million tonnes for the fiscal year ended March 31 from 24.9 million tonnes for fiscal 2017.

Meanwhile, Reliance Jio -- RIL's digital business subsidiary -- has emerged as the second-largest telecommunications operator in India with 355 million subscribers as of September 30.

Supported by these improvements, RIL's EBITDA (earnings before interest, tax, depreciation and amortisation) increased by 71.6 per cent to Rs 95,900 crore for fiscal 2019 from Rs 55,900 crore for fiscal 2017. The composition of EBITDA has also become more balanced between hydrocarbon and consumer businesses.

Moody's expects that by fiscal 2022, the hydrocarbon businesses will only account for about 50 per cent of RIL's consolidated EBITDA. Given the change in RIL's business mix, Moody's no longer views RIL as only an oil refining and marketing company but a mix of diverse businesses.

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