Fitch affirms stable outlook rating to RIL

Fitch Ratings has affirmed Reliance Industries' long term foreign currency and domestic currency issuer default rating at 'BBB-' and 'BBB', respectively with stable outlook.

"Fitch Ratings has affirmed India-based Reliance Industries Ltd's (RIL) Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB-', and its Long-Term Local-Currency IDR at 'BBB'. The outlook on the ratings is stable," Fitch Ratings said in a statement.

According to the statement, RIL's ratings are supported by its strong business profile-a large-scale refinery with capacity of around 1.4 million barrels per day, and robust asset quality, which enables it to consistently deliver gross refining margins (GRM) above regional benchmarks.

The company has a somewhat integrated business, with downstream petrochemical operations as well as upstream, together with strong operating cash flows and ample liquidity, it said.

The company is in the midst of a large capex programme of more than USD 30 bn that will run through to the financial year ending March 2017 (FY17).

The capex is largely in its refining and petrochemical segments and its new telecoms venture in India. The high capex has led to an increase in net financial leverage (net adjusted debt to operating EBITDA), although Fitch expects it to fall as various projects get commissioned over the next 12-18 months.

RIL's operating and expected financial profile places its unconstrained credit profile at the 'BBB' level, which is reflected in the company's Local-Currency IDR; its Foreign-Currency IDR is constrained by India's 'BBB-' Country Ceiling.

Fitch expects profitability of the company to climb from FY'17 following investments in the refining and petrochemical businesses.

However, it said that the success of its new telecom operations remains to be seen. The Indian telecom sector is highly competitive; Fitch expect RIL's entry to add further pressure on tariffs, especially for data.

"We think that in the initial period, the company will incur significant costs as it builds up its presence and competes for market share with the incumbent players," it said.