Moody's affirms "globally competitive" RIL's rating

03 December 2007 12:54  [Source: ICIS news]

MUMBAI (ICIS news)--Moody’s Investors Service affirmed the Baa2 issuer and senior unsecured rating of Reliance Industries Limited (RIL) on Monday, while maintaining a stable outlook on the Indian producer.

"The rating reflects RIL's well-established and integrated production facilities and its globally competitive refining operations, which command higher margins relative to many of its competitors," said Moody’s senior vice-president Terry Fanous.

It also recognised RIL’s moderate financial leverage and its substantial operating cashflow generation, he added.

The rating takes into account RIL's sizable expansion plans, which require high capital investments and entail execution risk, and its exposure to a single-site complex at Jamnagar, Moody’s said.

RIL’s operating cashflow generating capacity will be materially enhanced over the next 12-24 months, after the commissioning of its new greenfield refinery and domestic gas project, it added.

The company also has plans to undertake substantial investments in refining, petrochemicals and exploration and production, as well as the retail sector, Moody’s said.

"RIL is well positioned in the Baa2 rating, which assumes that the company’s investments will be made in a manner that would not materially weaken its financial profile," it added.

The rating could be upgraded if the company maintains its strong financial profile as it executes its expansion plan so that its scale and diversity strengthen, Moody’s said.

RIL’s rating would experience downward pressure if it undertakes aggressive debt-funded capital investments or acquisition plans, has dividend payouts over its policy of 20%-25% or its profitability deteriorates due to a weakening operating environment, it added.

By: Divya Chowdhury
+65 6780 4359

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