Live news , top stories, corporate news, company news, sector news, economy news, results analysis news, ceo interviews, fund manager interview, advisor interview, market news, bazaar talk, hot stocks news, ipo news, commodities news, mutual fund news, insurance news, news wire
20 September, 2021 19:50 IST
Fitch expects RIL's liquidity at parent level to remain strong
Source: IRIS | 23 Feb, 2021, 06.40PM
Rating: NAN / 5 stars.
Comments  |  Post Comment

Fitch Ratings sees the proposed reorganisation plan by India's Reliance Industries (RIL, BBB-/Stable) to transfer its refining, marketing and petrochemical (oil-to-chemicals) businesses to a wholly owned subsidiary, Reliance O2C (O2C), as a step towards facilitating participation by strategic investors in its O2C businesses. "We anticipate the reorganisation will have a neutral impact on RIL's credit metrics and rating.

"The transfer will be on a "slump sale basis", subject to attaining the requisite approvals. The consideration for the transfer will be in the form of long-term interest-bearing debt of USD25 billion to be issued by O2C to RIL, the rating agency said.

RIL's external debt is proposed to remain with RIL only. As RIL moves its oil refining, petrochemical and 51% stake in a fuel retail subsidiary - among other businesses - to O2C, it will continue to hold businesses like textiles and upstream oil & gas, and will act as an incubator for new growth businesses, it added.The proposed re-organisation eases the formation of strategic partnerships and stake sales to potential investors focussed on investments in oil-to-chemicals businesses. RIL has been in on-going discussions with Saudi Arabian Oil Company (Saudi Aramco, A/Negative) to sell a minority stake in its oil-to-chemicals businesses, which, if successful, should lead to further deleveraging of RIL, Fitch said.

Following the re-organisation, the risk of any cash-flow subordination should be mitigated by RIL's significant majority control in its key subsidiaries along with its strong liquidity, minimal external debt at the subsidiaries' levels, and overall low consolidated leverage position. RIL holds 67% in its digital services and 85% in retail business subsidiaries, and aims to maintain a significant majority stake in O2C, which provides significant control and access to cash flows generated by these businesses.

Long-dated loans issued by O2C to RIL, as part of the reorganisation, will provide an efficient mechanism to upstream cash generated from O2C to RIL. Furthermore, RIL plans to retain the majority of the existing cash of USD 30.2 billion (as of end-December 2020) at the parent level, thereby supporting liquidity. The cash balance has benefited from the proceeds of Rs 1.5 trillion (USD 20.8 billion) from the sale of a 33% stake in digital services, Rs 0.5 trillion (USD 6.5 billion) from the sale of a 10% stake in its retail subsidiaries and part of the proceeds from RIL's Rs 0.5 trillion (USD 7.3 billion) rights issue, the credit rating agency added.

"We do not expect any change in RIL's consolidated adjusted net leverage, which is approaching zero amid declining capex. We expect RIL's liquidity at the parent level to remain strong. This would be assisted further by cash upstreaming via interest and debt repayments on long-term loans from O2C in addition to potential dividends from its large subsidiaries," Fitch said.

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.

 Post Comment
Name Email
Security Code type    into this box
Related Articles
IRB Infra gets DGCA License to operate Sindhudurg Airport - 20-Sep-2021 17:19
HLE Glascoat to acquire global business of Thaletec GmbH - 20-Sep-2021 17:00
Welspun Corp wins multiple orders worth Rs 14 bn - 20-Sep-2021 13:51
Adani Ports gets nod to raise Rs 10 bn via NCDs - 20-Sep-2021 13:35
Bliss GVS Pharma purchases immovable property from JMFARC - 20-Sep-2021 13:03
Home  |   Shares  |   F&O  |   Mutual Funds  |   Loans  |   Insurance  |   News Centre
Wealth Tracker  |   Newsletters  |   Tax Corner  |   NRI Centre  |   Advertise
© All rights reserved. IRIS Business Services Limited
A Disclaimer