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RIL's decision to re-evaluate stake sale in O2C business to not impact credit quality: Moody's

RIL's decision to re-evaluate stake sale in O2C business to not impact credit quality: Moody's

Moody's said the sale would have strengthened RIL's balance sheet and liquidity as it continues to incur capital spending for its digital services, and new energy and retail businesses.

Last week, RIL announced that it will be withdrawing its application from the NCLT for segregating the O2C business. Last week, RIL announced that it will be withdrawing its application from the NCLT for segregating the O2C business.

Ratings agency Moody's Investors Service on Tuesday said that the decision of Reliance Industries Ltd (RIL) to re-evaluate the transfer of its oil-to-chemical (O2C) business to a wholly-owned subsidiary and stake sale to Saudi Aramco will not impact the credit quality of the Mukesh Ambani-led company.
 
"The decision to re-evaluate the transfer and the stake sale will not impact RIL's credit quality because the company already has a strong balance sheet to accommodate future investments required for its various businesses," Moody's said in a statement.
 
In August 2019, RIL and Saudi Aramco had signed a non-binding 'Letter of Intent' for a potential 20 per cent stake acquisition by Saudi Aramco in the O2C business. However, last week RIL announced that due to the evolving nature of its business portfolio, the companies have determined that it would be beneficial for both the parties to re-evaluate the proposed investment.
 
Besides, the company also said that it is withdrawing its application from the National Company Law Tribunal (NCLT) for segregating the O2C business, which comprises of refining, marketing and petrochemical operations.
 
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Moody's said that the proposed reorganisation was intended to enable RIL to sell a stake in O2C segment to strategic investors, including Saudi Aramco. The sale would have strengthened RIL's balance sheet and liquidity as it continues to incur capital spending for its digital services, and new energy and retail businesses, it said.
 
The ratings agency said that RIL has a rating downgrade trigger of net debt/EBITDA of 3.0x, but it reported a net cash position as of September 30, 2021. Besides, it said it expects RIL to generate sufficient cash flows from operations each year to fund its capital spending.
 
"RIL'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.
 
While announcing its decision, RIL had said that it will continue to be Saudi Aramco's preferred partner for investments in the private sector in India and will collaborate with Saudi Aramco and SABIC for investments in Saudi Arabia.
 
Shares of RIL closed 0.96 per cent higher at Rs 2,386.15 on the BSE on Tuesday.

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