"The affirmation reflects Reliance's dominant competitive position, the relatively stable medium term prospects for its core refining and petrochemical businesses, and an overall moderate financial profile of the company", said Standard & Poor's credit analyst Anshukant Taneja.
The ratings factor in the likelihood of timely completion of its ongoing projects, specifically the new refinery at Jamnagar, India. The ratings are also underpinned by the expectation that Reliance would pursue its non-core businesses, specifically investments in the retail sector, in a modular phased-out manner, as an accelerated investment strategy can weigh on the company's overall credit profile.
"The ratings remain constrained by Reliance's exposure to highly cyclical industries, large capital commitments in its refining, exploration and production businesses, and uncertainties in developing its reportedly large gas reserves", added Mr. Taneja.
Standard & Poor's views Reliance's Indian rupee (INR) 617 billion (US$ 13.5 billion) capital expenditure plan with caution, given potential softening in the petrochemical cycle, reduced demand for refined petroleum products, and uncertainties related to the company's upstream gas business. Lower-than-expected cash flows for funding a part of the capital expenditure could mean higher borrowings, which would weaken the company's credit protection measures.
"Reliance's current financial position, strong liquidity, and high access to financial resources do mitigate some of these risks," noted Mr Taneja.
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