Moody’s Affirms Reliance Industries’ Baa2 Rating with a Stable Outlook

Introduction:

Global rating agency Moody’s Investors Service has recently reaffirmed the Baa2 rating for Reliance Industries Limited (RIL), maintaining a stable outlook. This affirmation reflects RIL’s substantial market presence and strong performance across its diverse business sectors.

Key Highlights

Consolidated EBITDA Growth:

Moody’s projects a significant growth in RIL’s consolidated EBITDA, estimating a 14% increase to ₹1.7 trillion (around $21 billion) for the fiscal year ending March 31, 2024. This growth is expected to be driven by robust performances in digital services, retail, and the upstream oil and gas segment.

Consumer Businesses Driving Growth

Moody’s anticipates an annual EBITDA growth of 10%-12% over the next two years, primarily fueled by the strong performance of RIL’s consumer businesses, including digital services, retail, and the oil and gas segment.

Digital Services Segment (Reliance Jio)

For the digital services segment, specifically Reliance Jio, Moody’s predicts steady growth in subscribers. Initiatives like the rollout of 5G services, home broadband expansion, and the introduction of Jio Bharat phone are expected to contribute to a 15%-20% annual EBITDA growth for this segment over the next two years.

Retail Sector (Reliance Retail Ventures Limited)

In the retail sector operated by RRVL, an EBITDA growth of 22%-27% is forecasted, supported by India’s growing consumption, urbanization, and rising income levels.

Challenges in Oil-to-Chemicals Segment

Earnings from RIL’s oil-to-chemicals segment are expected to remain flat compared to fiscal 2023 due to normalizing refining margins and subdued petrochemical spreads. However, the upstream oil and gas segment is projected to witness strong growth in fiscal 2024.

Leverage and Cash Flows

Moody’s expects RIL’s leverage (adjusted net debt/EBITDA) to remain at 1.5x-1.6x over the next 12-18 months. The retained cash flows/net debt ratio is anticipated to stay around 40%-45%, positioning RIL strongly for its current ratings.

Rating Limitation

Despite robust credit metrics, RIL’s rating is capped at no more than one notch above India’s sovereign rating due to its increasing exposure to the domestic economy through consumer businesses.

Stable Outlook

The stable outlook on RIL’s ratings mirrors the stable outlook of the Indian sovereign rating, with Moody’s expecting continued earnings growth across most business segments.