05 May , 2021 By : Kanchan Joshi
MUMBAI : S&P Global Ratings on Wednesday said that Reliance Industries Ltd will continue to deleverage its balance sheet on the back of company's prudent investment policies, stable operations, and potential for further asset monetization.
"RIL's deleveraging could exceed our expectations, driven by sizeable asset monetization and equity raising," the rating agency said in a statement.
"The oil-to-telecom conglomerate has a cash inflow of Rs2.2 trillion (about $30 billion) during fiscal 20-21, lowering its net debt by about 70% to about Rs54,000 crore. The reduction in debt was despite having negative free cash flows of about Rs86,000 crore during the year," it added.
As a result, S&P estimate adjusted debt-to-Ebitda ratio will improve to about 1 time in fiscal 2021 from 3.1 times in fiscal 2020. Ebitda is earnings before interest, tax, depreciation, and amortization, and it is a measure of a company's overall financial performance.
"Asset monetization by RIL over the next 12 to 24 months cannot be ruled out as it is in the process of spinning off its oil-to-chemicals segment into a wholly owned subsidiary and has a non-binding letter of intent to sell a 20% stake in the segment to Saudi Arabian Oil Co. Going ahead, monetization is possible in RIL's telecommunications and retail businesses," it said.
S&P added that it expects RIL to receive about Rs40,000 crore from a rights issue later this year.
RIL's fourth-quarter (January-March) earnings were resilient despite covid-19 pandemic. Consolidated Ebitda fell 9% year-on-year to about Rs81,000 crore as the covid-19 pandemic and lockdowns, both globally and locally, weighed on the company's oil refining and petrochemicals as well as retail businesses. The digital and retail division was a bright spot, however.
"Sizable investments by RIL is the only risk to the company. But, we believe the management is committed in maintaining low levels of leverage and the company's track record of sound credit quality," it said.
Meanwhile, even if the company's credit metrics strengthen further, the ratings would likely remain at 'BBB', given India's transfer and convertibility assessment of 'BBB'.
0 Comment