Moody’s assigns Baa2 score to RIL’s $5 billion bonds problem

Moody’s Investors Service on Tuesday assigned a Baa2 score to the proposed USD-denominated senior unsecured bonds of Reliance Industries Limited (RIL), with secure outlook.
Reliance final week mentioned it would elevate as a lot as USD 5 billion in overseas foreign money denominated bonds and use the proceeds to retire current borrowings.
“RIL’s Baa2 ratings reflect the company’s large scale and dominant market position across its diverse businesses, its management’s strong execution track record and our expectation that its credit metrics will remain strongly positioned for its Baa2 rating, despite its planned investments in clean energy and other business segments,” Sweta Patodia, a Moody’s Analyst, mentioned within the score company’s press assertion.
The agency’s excessive dependence on the Indian financial system via its digital companies and retail companies constrains its score to 1 notch above that of the Indian sovereign score, Patodia mentioned.

Moody’s mentioned RIL advantages from diversified earnings sources which have little or no correlation, given its presence within the refining and petrochemicals, digital companies, and client retail segments. These three segments collectively generated round Rs 94,400 crore (USD 12.6 billion) or 86 per cent of RIL’s consolidated EBITDA for the 12 months ended September 30, 2021.
The firm’s digital companies and client retail companies are housed below separate subsidiaries, whereas its refining and the petrochemical enterprise — also referred to as the oil-to-chemical (O2C) phase — is held on the holding firm stage.
RIL’s announcement to extend tariffs for its digital companies enterprise is optimistic for the telecommunications business, whereas the easing of pandemic-related disruptions will assist demand for oil and gasoline in addition to improve client spending. These traits bode nicely for RIL’s varied enterprise segments and can maintain earnings sturdy over the following 12-18 months, Moody’s mentioned.
“A resurgence of coronavirus infections due to the emergence of new variants could result in fresh lockdowns and affect the company’s O2C and retail earnings,” it mentioned.
RIL’s earlier bulletins to switch its gasification enterprise right into a wholly-owned subsidiary whereas reevaluating the deliberate switch of its O2C enterprise to a separate subsidiary won’t have any affect on the corporate’s credit score profile.
“The stable outlook reflects Moody’s expectation that the company’s earnings will continue to improve over the next 12-18 months across all its business segments, such that its credit metrics will remain strongly positioned for its ratings,” the assertion mentioned including the secure outlook can also be in step with the secure outlook of the Indian sovereign score and displays Moody’s view that RIL can’t be rated multiple notch above the Indian sovereign.
RIL has glorious liquidity. As of September 30, 2021, the corporate had adjusted money and money equivalents, together with quoted marketable securities, of about Rs 1.9 lakh crore (USD 25.6 billion). Its current money, together with anticipated money flows from operations, will likely be enough to cowl its money outflows for capital spending and debt maturities within the subsequent 18 months.

In November 2021, RIL acquired round Rs 26,600 crore in proceeds from the ultimate name on its rights problem, which additional enhances its liquidity.
The firm’s liquidity is additional supported by its sturdy banking relationships and entry to home and worldwide capital markets, Moody’s mentioned.