AgenciesRelated
NEW DELHI: Thanks to improving debt profile, Fitch Rating upgraded ’ (RIL) long-term foreign currency issuer default rating to BBB, a notch above India’s sovereign rating, but with a negative outlook.
At the same time, the agency affirmed long-term local-currency rating at 'BBB+' with a stable outlook, two notches above India’s sovereign rating.
“The upgrade is driven by our expectation that RIL's hard-currency external debt-service ratio will remain at above 1x over the next 12 months. Fitch's non-financial corporates exceeding the country ceiling rating criteria states that a company with a ratio of above 1x over at least 12 months can be rated one-notch above the country ceiling,” said Fitch Ratings.
India's country ceiling is BBB-. In simple terms, it implies that Fitch finds Reliance Industries' ability to pay its debts on time better than that of the Indian government.
The agency said the negative outlook reflects the outlook on India's sovereign rating BBB- with negative outlook. Should the sovereign issuer default ratings be downgraded, the country ceiling may be revised down in tandem, it added.
“This would constrain RIL's foreign-currency issuer default rating to one notch above the country ceiling,” Fitch said in a statement.
RIL's local-Currency issuer default rating reflects the company's strong business profile, with market leading positions and diversified cash flow from a mix of oil to chemical (O2C) and consumer businesses, as well as lower net leverage.
The agency further said it expects RIL's Ebitda to increase to around Rs 1.1 lakh crore in FY22, supported by a recovery in petrochemical spreads, transportation fuel cracks, higher refining throughput and a continued rise in digital services Ebitda.
RIL's Ebitda generation of around Rs 76,000 crore, although 12 per cent lower YoY, remained resilient amid the coronavirus pandemic, reflecting the benefits of diversity of cash flow generation. Overall EBITDA generation was also supported by a 55 per cent surge in digital services segment Ebitda, which defied the pandemic-related economic slowdown.
Many brokers have said they are bullish on Reliance's future. Shares of RIL were trading down 1.18 per cent at Rs 2,179. The company’s AGM is scheduled later in the day today.
“In the upcoming AGM, Reliance is likely to announce about kickstarting 5G services, which might begin in late 2021. Moreover, 5G phones are likely to be revealed in the AGM, which might be another interesting development to watch out for. Announcement over dividend declaration and bonus might also come. Since Reliance likes to keep the market price of shares around Rs 1,000, we might get to see a 1:1 bonus announcement,” said Gaurav Garg, Head of Research, CapitalVia Global.
At the same time, the agency affirmed long-term local-currency rating at 'BBB+' with a stable outlook, two notches above India’s sovereign rating.
“The upgrade is driven by our expectation that RIL's hard-currency external debt-service ratio will remain at above 1x over the next 12 months. Fitch's non-financial corporates exceeding the country ceiling rating criteria states that a company with a ratio of above 1x over at least 12 months can be rated one-notch above the country ceiling,” said Fitch Ratings.
Did you Know?
Stock score of Reliance Industries Ltd moved up by 1 in a month on a 10-point scale.
View Latest Stock Report »India's country ceiling is BBB-. In simple terms, it implies that Fitch finds Reliance Industries' ability to pay its debts on time better than that of the Indian government.
The agency said the negative outlook reflects the outlook on India's sovereign rating BBB- with negative outlook. Should the sovereign issuer default ratings be downgraded, the country ceiling may be revised down in tandem, it added.
“This would constrain RIL's foreign-currency issuer default rating to one notch above the country ceiling,” Fitch said in a statement.
RIL's local-Currency issuer default rating reflects the company's strong business profile, with market leading positions and diversified cash flow from a mix of oil to chemical (O2C) and consumer businesses, as well as lower net leverage.
The agency further said it expects RIL's Ebitda to increase to around Rs 1.1 lakh crore in FY22, supported by a recovery in petrochemical spreads, transportation fuel cracks, higher refining throughput and a continued rise in digital services Ebitda.
RIL's Ebitda generation of around Rs 76,000 crore, although 12 per cent lower YoY, remained resilient amid the coronavirus pandemic, reflecting the benefits of diversity of cash flow generation. Overall EBITDA generation was also supported by a 55 per cent surge in digital services segment Ebitda, which defied the pandemic-related economic slowdown.
Many brokers have said they are bullish on Reliance's future. Shares of RIL were trading down 1.18 per cent at Rs 2,179. The company’s AGM is scheduled later in the day today.
“In the upcoming AGM, Reliance is likely to announce about kickstarting 5G services, which might begin in late 2021. Moreover, 5G phones are likely to be revealed in the AGM, which might be another interesting development to watch out for. Announcement over dividend declaration and bonus might also come. Since Reliance likes to keep the market price of shares around Rs 1,000, we might get to see a 1:1 bonus announcement,” said Gaurav Garg, Head of Research, CapitalVia Global.
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