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Journalism of Courage
Barely a week after Reliance Industries announced a significant gas discovery in its KG-D6 block sending its shares soaring by 7.5 per cent over the last three trading sessions,global ratings firm Standard & Poors raised the companys long-term corporate credit rating from BBB to BBB+.
The revision in RILs rating by S&P has come after eight years,In November 2005,S&P had moved RIL to BBB from BB+. RILs new rating at BBB+ is now two notches above Indias sovereign rating which currently stands at BBB-.
However,S&P clarified that the gas discovery in KG-D6 was not the trigger for upward revision. The revision was based on the clarity on the companys planned $30 billion investment.
Based on our discussions with the management we have more clarity and detail on the spend and timeline. We have an understanding of how they will deploy funds over the next 3-4 years and how it will impact their profitability, said Mehul P Sukkawala,of S&P.
S&P,however,kept its outlook at negative in line with the sovereign credit rating outlook.
The ratings agency has also raised its long-term issue ratings on senior unsecured notes and loans,and the senior unsecured notes issued by Reliance Holding USA Inc from BBB to BBB+.
Reliances articulation of its growth strategy removes the uncertainty regarding the companys use of its high cash balance, said S&Ps credit analyst Andrew Wong.
S&P said RIL will spend 75 per cent of its $30 billion investment over the next three years towards its core businesses of refining,petrochemical,and exploration and production and will push up the profitability margins.
Market experts are however saying that this has come as a post event response.
… the company has not qualified the size of discovery and the DGHC has yet to approve the same…. It will take a couple of years to monetise it and the EPS upgrade will happen for FY16, said SP Tulsian,an independent market expert.
