Reliance Industries Ltd’s (RIL) strategy to diversify and dominate several industries will boost spending and will also help mitigate its elevated capex needs, rating agencies said on Wednesday.
While S&P Global Ratings said it believes that “the company’s appetite for bigger investments or M&As will dissipate”, Fitch Group company CreditSights said its “credit metrics to worsen moderately in FY2024 (April 2023 to March 2024 fiscal) versus FY2023 as elevated capex (telecom, retail and renewable energy) outweighs resilient EBITDA growth.”
S&P said RIL’s adjusted debt will likely remain at Rs 2.6 lakh crore to Rs 2.7 lakh crore over the next two years. “This is due to several planned investments under its pipeline, including 5G services, oil refining and petrochemicals, renewables, and retail expansion.”
“In our view, the company remains committed to maintaining leverage commensurate with the rating (BBB+/Stable/--),” it said. “Management has publicly reiterated its focus on managing the balance sheet to maintain its investment grade rating at the current level.”
To mitigate the pressure on the balance sheet from sizable investments, RIL has shown the flexibility to monetise non-current assets, including corporate bonds and government securities in fiscal 2023.
“We also believe RIL could further monetise additional assets or raise equity to fund investments if needed,” S&P said. “RIL’s strategy to diversify and dominate several industries will boost spending above our original expectations,” S&P said. “RIL’s expansion is manageable.”
The company’s continued growth in operations will also cap leverage. Based on adjusted figures, EBITDA for RIL jumped 30 per cent in fiscal 2023 to Rs 1.4 lakh crore. Growth was driven by all segments.
“Debt has also risen. Spending on capital expenditures was Rs 1.4 lakh crore in fiscal 2023 versus our expectation of Rs 0.9 lakh crore, and the company spent Rs 88,000 crore acquiring 5G spectrum.