Global rating agency Moody's today said the sale of treasury shares by the Mukesh Ambani-run Reliance Industries (RIL) will have no immediate impact on the country's largest private company's ratings.
The company has been assigned Baa2 ratings with stable outlook. Baa2 rating is a medium grade rating, reflecting moderate credit risk. Stable outlook indicates the rating is unlikely to be downgraded.
"While the equity-raising exercise is credit-positive, it does not have an immediate impact on the rating, as the rating agency expects RIL to use the proceeds for a potential takeover of LyondellBasell, as well as for other strategic initiatives that could emerge over the medium-term," Moody's said in a release today.
Reliance today raised Rs 3,465 crore by selling 3.3 treasury stocks for the second time this month amid the company upping its bid to $13.5 billion for the failed Dutch petrochemicals firm LyondellBasell.
RIL last week had raised its bid for LyondellBasell to $13.5 billion from the initial $12 billion offered in November.
This is the second treasury share sale by RIL this month, taking its total mop-up from the open market to Rs 6,140 crore.
Moody's further said although the overall amount raised is large, it represents less than 2 per cent of the company's current market capitalisation and less than 3 per cent of its total assets as of March 2009.
According to Moody's, "RIL is effectively building up a warchest to fund its expansion opportunities; Moody's thus expects it to progressively use its increased financial flexibility for acquisitions, rather than use the proceeds of the share sale to pay down debt."
Following today's sale, the company is expected to have a cash position of around $4.5 billion and treasury shares of about $6.5 billion.
If liquidated, these shares could provide RIL with significant resources to fund a potential deal without materially impacting its financial metrics, it said.
"The near-term focus for the rating is the potential bid for LyondellBasell," it said, adding that "should the transaction take place, Moody's will consider a range of key issues that could affect RIL's business and financial profiles."
Moody's last rating action on RIL was taken on March 2, 2009, when it affirmed RIL's Baa2 ratings with a stable outlook, following the announcement of the merger with its subsidiary Reliance Petroleum with itself.
