Mumbai, Dec. 24: Crisil has re-affirmed the outstanding ratings of Reliance Industries (RIL) as it believes that the company’s second open offer for BSES may not impact its credit profile significantly. The leading rating agency has reaffirmed the AAA rating for Reliance’s non-convertible debenture issues despite a potential outflow of about Rs 630 crore.
Reliance already holds about 43 per cent of BSES’ equity capital with an investment of around Rs 1,400 crore.
Crisil while giving a brief account of Reliance's immense financial muscle also pointed to the fact that the ambitious expansion plans could lead to the company stretching its balance sheet.
RIL’s strong position in the domestic petrochemicals business has been further enhanced by its acquisition of a 46 per cent equity stake in the country's second largest polymer manufacturer — Indian Petrochemicals Corp (IPCL), Crisil said.
Together with IPCL, Reliance now controls almost three-fourth of the growing Indian polymer market and is among the top 10 polymer manufacturers in the world, the agency added.
Alluding to the fact that together with these strengths, the company also benefits from its cost-efficient and integrated operations (extending from oil refining to downstream polymers, fibre-intermediates and polyester segments), which somewhat balances the adverse effect of high earnings volatility in commodity chemicals.
The large cash accruals, favourable cash debt-service coverage ratios, and high financial flexibility of Reliance also provide comfort to its financial profile, Crisil explained.
However, the agency warned that these strengths are, however, partly offset by the company's large investment plans in existing and new business ventures, which have a potential to stretch the company's balancesheet over the next few years.
“The investment outlay, which includes large expenditure in oil and gas exploration and development, oil refining and marketing, and investments in the soon-to-be-launched telecom initiative, has increased considerably from the earlier Crisil expectation,” the rating agency said.