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1-2 December 2021

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India’s Reliance Industries Limited (RIL) received a welcome upgrade to its Foreign-Currency Issuer Default Ratings to BBB from BBB- by Fitch Ratings. However, the upgrade was accompanied by a negative outlook. Fitch based the upgrade on expectations that RIL’s hard currency debt-service ratio will remain above 1.0x over the next 12 months. The upgrade puts the rating one notch higher than India’s BBB- rating. The rating agency has also affirmed the company’s Long-Term Local Currency IDR at BBB+ with a stable outlook reflecting the company’s strong business profile and its leading position in the market. RIL’s EBITDA is expected to increase to ~INR 1.1tn ($14.81bn) in FY2022 vs. a resilient $760mn last year amid the pandemic. The lower EBITDA last year was largely due to a 31% drop in its oil to chemical (O2C) segment, which stood at INR 382bn ($5.14bn) due to lower demand amid the pandemic. The digital services on the other hand experienced a 55% increase in its EBITDA. The O2C EBITDA is likely to recover above the sustained level of INR 500bn ($6.73bn) and the telecom sector is expected to see a growth of 37% in FY2022 and a sustained growth of 12-14% thereafter. According to Fitch, RIL has successfully reduced its foreign-currency borrowings by 36% after it prepaid $7.8bn in FY2021 using a part of the proceeds from its rights issues and the stake sale of  its digital-service and retail subsidiaries.

RIL’s 4.125% 2025s and 6.25% 2040s were down 0.21 and 0.02 respectively to trade at 109.04 and 139.98.

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