S&P raises Reliance Industries’ rating to ‘A-’ as consumer businesses boost earnings

S&P Global Ratings has raised Reliance Industries Ltd's (RIL) long-term issuer credit rating to 'A-' from 'BBB+' on the back of improved cash flow stability and the growing importance of its less cyclical consumer-facing businesses. At the same time, the ratings on its senior unsecured debt were also upgraded to 'A-', reflecting the company’s robust financial position.

The stable outlook reflects S&P's expectation that RIL will maintain its leadership in key sectors, ensuring sufficient earnings to support its capital expenditures over the next 12-24 months. The rating upgrade is underpinned by strong earnings growth from the company’s digital services and retail segments, which now contribute significantly to its operating cash flow.

Reliance Industries’ expansion into more stable consumer businesses is expected to further enhance its earnings and cash flow stability, which will help the conglomerate weather the volatility of its traditional oil and gas operations. As of fiscal 2026, the company projects that its digital services and retail businesses will account for approximately 60% of operating cash flow, reducing its reliance on the oil-to-chemicals (O2C) and oil and gas segments.

The company’s telecom subsidiary, Reliance Jio, is expected to continue its strong performance with a forecasted increase in wireless subscribers by 3-6% over the next 12-24 months, driven by subscriber churn from competitors. Additionally, average revenue per user (ARPU) for Jio is expected to rise as customers upgrade to higher-priced plans and consume more data, with the company having already led two major tariff hikes in the Indian market.

Despite ongoing heavy capital expenditures, which are projected at Rs 1.4 lakh crore through fiscal 2027, Reliance Industries is well-positioned to generate positive free operating cash flow, thanks to its growing consumer-facing businesses. The company also plans to invest in renewable energy, which is expected to contribute significantly to earnings over the next five years.

Reliance Industries maintains a financial policy that aligns with its 'A-' rating, targeting a net debt-to-EBITDA ratio below 1x, even as it continues investing in capital-intensive areas like renewable energy. The company’s track record of monetizing assets, as seen in the raising of Rs 2.1 lakh crore (approximately $29 billion) in fiscal 2021, demonstrates its ability to reduce leverage following periods of high investment.

With a diversified business portfolio and a strong balance sheet, Reliance Industries’ outlook remains stable, with expectations of continued earnings growth from its diversified operations. However, any deviation from its financial policy, including aggressive debt-funded investments without corresponding earnings growth, could put downward pressure on its rating.

The 'A-' rating is two notches higher than India’s sovereign rating, reflecting Reliance Industries' strong financial position and exposure to US.dollar revenue, which provides resilience in the event of liquidity stress. Nonetheless, the company’s significant exposure to India constrains the upside potential for its foreign currency rating.