S&P upgrades RIL's credit rating to BBB+

Reliance Industries on Wednesday got a shot in the arm from Standard & Poor's, which upgraded its credit rating to 'BBB+' from 'BBB' - RIL's best-ever, and two notches above the sovereign rating - making the Mukesh Ambani-led firm the best rated firm in India.

RIL Group Chief Financial Officer Alok Agarwal said, "We are elated at the development as this rating upgrade is the best-ever we have had."

S&P Asia Pacific Managing Director and analytical manager for corporates and infrastructure ratings team Suzanne Smith said in a conference call from Singapore: "We have upgraded Reliance to BBB+ from BBB, with a negative outlook, because we believe RIL's strategy to grow organically will strengthen its competitive position and support its profitability."

She said the global rating agency now has "greater clarity on Reliance's expansion strategy. The company intends to spend more than $30 billion on growth over the next three years, of which at least 75 per cent will be toward its core businesses of refining, petrochemical, and exploration and production".

`BBB+' is an investment grade rating indicating relatively lesser risk. 'BBB' is defined by S&P as "adequate capacity to meet financial commitments, but more subject to adverse economic conditions".

The US-based agency's credit analyst for the region, Andrew Wong said, "RIL's articulation of its growth strategy removes the uncertainty regarding use of its high cash balance," which stood at close to Rs 83,000 crore at FY13-end.

Asked what was the new trigger for the rating upgrade, S&P Director for corporates and infrastructure ratings team for the region Mehul Sukkawala said the move follows their meeting with RIL management recently.

It brought greater clarity on the company's investment strategy and its better competitive position in the marketplace following its focus on shale gas development as well as its ongoing $30 billion investment in the petrochem and refining businesses, he said.

About assigning higher than the sovereign rating, Sukkawala said that RIL, with a BBB rating, was already rated higher than the national rating at BBB-. And after today's upgrade it stands two notches above the sovereign rating.

Sukkawala said IT giants TCS, Infosys and Wipro (BBB from S&P) already enjoy higher rating than the sovereign.