Reliance outlook raised to positive

New Delhi: Fitch Ratings on Friday raised the outlook on Reliance Industries (RIL) to positive from stable due to the company's potential to further deleverage following its announcement to eliminate its net debt by March 2021.

In a statement, Fitch said it is revising "the outlook on RIL's Long-Term Local-Currency issuer default rating (IDR) to Positive from Stable and has affirmed the rating at 'BBB'."

"At the same time, the agency has affirmed the Long-Term Foreign-Currency IDR at 'BBB-' with a Stable Outlook, as RIL's Foreign-Currency IDR is capped by India's (BBB-/Stable) Country Ceiling of 'BBB-'," the statement said.

The revision in the outlook follows RIL announcing plans to sell a 20 per cent stake in its oil-to-chemical division to Saudi Arabian Oil Company (Saudi Aramco).

This provides RIL potential to "further deleverage" after eliminating its net debt by the financial year 2020-21. "We forecast its adjusted net debt/EBITDAR to reach 1.5x over the next 18 to 24 months," Fitch said.

The rating affirmation reflected RIL's strong business profile - a large-scale refinery with a capacity of around 1.2 million barrels a day and dominant market position in petrochemicals.

"The company has completed capex to increase its downstream integration, which has improved feedstock flexibility," the rating agency said adding it expects RIL's digital-services business, Jio, to continue its strong growth.

Jio has achieved a leading position in its wireless subscriber base, though it is still evolving, as reflected in the recent spinoff of its tower and fibre assets to investment trusts and plans to roll out a fiber-to-the-home business.