Reliance’s rating unchanged on Aramco deal deferment: Moody’s
Moody’s Investor Service has said that there is no change in Reliance Industries’ credit rating profile after the company along with its partner Saudi Aramco said that they decided to re-evaluate their business investment proposal.
At the end of last week, Reliance Industries said that the company and Saudi Aramco had agreed to re-evaluate a proposal wherein the latter was considering to buy up to 20% in Reliance Industries’ oil-to-chemical (O2C) segment. The discussion, initiated two years ago, could have led to Saudi Aramco investing over $15bn for the said stake in the venture.
“The decision to re-evaluate the transfer and the stake sale will not impact Reliance Industries’ credit quality because the company already has a strong balance sheet to accommodate future investments required for its various businesses,” said Moody’s report.
“The sale would have strengthened the company’s balance sheet and liquidity as it continues to incur capital spending for its digital services, and new energy and retail businesses,” the report added.
Sufficient cash flow
Reliance has a rating downgrade trigger of net debt-operating profit ratio but the company reported a net cash position as of 30 September. Moody’s said it expected the company to generate sufficient cash flows from operations each year to fund its capital spending.
“Reliance’s announcement to revisit its earlier plan of divesting stake in its O2C business will allow the company to reassess the interlinkages and synergies between its legacy O2C business and its new energy business that was announced recently. This will be important as the company has a target of achieving carbon neutrality by 2035,” Moody’s said in its note.
Reliance’s 60 MTPA refinery at Jamnagar, Asia’s largest, is the centre of the bulk of the company's O2C assets and will also be the incubation centre for its new energy business.
Reliance has stated that Saudi Aramco will remain a strategic partner for its existing businesses for crude oil sourcing arrangements and for other future opportunities that could arise as its business evolves to adapt to changing energy requirements globally.
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