S&P upgrades RIL on clarity in business strategy

Global ratings agency Standard & Poor's (S&P) Wednesday said it has upgraded Reliance Industries Limited (RIL) ratings due to improved competitive position and greater clarity in the company's strategy.

The agency has upgraded RIL's long-term corporate credit rating 'BBB+' from 'BBB'. The outlook is negative. This will help reduce the company's cost of borrowings.

The agency has also raised its long-term issue ratings on the company's senior unsecured notes and loans, and the senior unsecured notes issued by Reliance Holding USA Inc. that Reliance guarantees, to 'BBB+' from 'BBB'.

"We upgraded Reliance because we believe the company's strategy to grow organically will strengthen its competitive position and support its profitability," Standard & Poor's credit analyst Andrew Wong said in the report.

"Reliance's articulation of its growth strategy removes the uncertainty regarding the company's use of its high cash balance," Wong said.

"We now have greater clarity on Reliance's expansion strategy," S&P said. The company intends to spend more than $30 billion on growth over the next three years, of which at least 75 percent will be toward its core businesses of refining, petrochemical, and exploration and production.

The negative outlook on Reliance reflects the outlook on the sovereign credit rating on India, S&P said.

The agency recently kept its outlook on India negative and said there is a one-in-three chance of a downgrade within the next 12 months.

"We could lower the rating on Reliance if we lower our transfer and convertibility assessment on India, which could happen if we downgrade the sovereign," S&P said.