The decision of Reliance Industries Ltd (RIL) to transfer its refining, marketing and petrochemical (oil-to-chemicals) businesses to a wholly-owned subsidiary will have a neutral impact on RIL's credit metrics and rating, stated the rating agency.
RIL, which is undergoing the process of transferring to a wholly-owned subsidiary Reliance O2C Limited (O2C), is taking this step towards facilitating participation by strategic investors in its O2C businesses. “We anticipate the reorganisation will have a neutral impact on RIL's credit metrics and rating.” stated Fitch Ratings.
RIL will be giving a long-term interest-bearing loan of USD 25 billion to the new entity.
The agency also stated that it does not expect any change in RIL's consolidated adjusted net leverage, which is approaching zero amid declining capex. “We expect RIL's liquidity at the parent level to remain strong. This would be assisted further by cash upstreaming via interest and debt repayments on long-term loans from O2C in addition to potential dividends from its large subsidiaries.”
The proposed reorganisation eases the formation of strategic partnerships and stake sales to potential investors focussed on investments in oil-to-chemicals businesses, stated the agency. “RIL has been in ongoing discussions with Saudi Aramco to sell a minority stake in its oil-to-chemicals businesses, which, if successful, should lead to further deleveraging of RIL,” it stated.