| Reliance Industries Limited | ||||||||||
| Ratings Reaffirmed | ||||||||||
| Rating Action | ||||||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||||||
| 1 crore = 10 million | ||||||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the existing debt instruments and bank loan facilities of Reliance Industries Limited (RIL).
Further, CRISIL Ratings has withdrawn its rating on NCDs aggregating Rs 2,500 crore (see ‘Annexure - Details of Rating Withdrawn' for details) on receipt of requisite documents. The withdrawal is in line with CRISIL Ratings’ rating withdrawal policy.
The re-affirmation of ratings continue to factor in RIL's leadership position and strong competitiveness in the O2C business, leadership position attained by Reliance Jio Infocomm Limited (RJIL; 'CRISIL AAA/Stable/CRISIL A1+') in the telecommunications (telecom) industry and by Reliance Retail Ventures Ltd (RRVL; 'CRISIL AAA/Stable/CRISIL A1+') in the retail industry, along with its exceptional financial flexibility.
The consolidated operating and financial performance of the company remained stable in the first six months of fiscal 2025. Revenue growth was healthy at ~6% while operating profitability remained stable against the same comparative period for the previous fiscal. The operating profitability in oil to chemical segment have seen moderation wherein margins have weakened owing to product cracks falling sharply due to increased supply of products and lower global demand. Further, the growth for retail segment was muted due to weak demand, particularly in the Fashion & Lifestyle segment. Oil and gas segment witnessed strong growth during the the first six months of fiscal 2025. Digital services continues to grow on account of improvement in average revenue per user (ARPU) and subscriber mix such that overall operating profitability has remained strong. The consolidated earnings before interest, tax, depreciation, and amortization (EBITDA) stood at Rs 86,682 crore for the six months ended September 2024 as compared to Rs 86,715 crore in the corresponding period of the previous fiscal. |
Analytical Approach CRISIL Ratings continues to follow an analytical approach that combined the business and financial risk profiles of RIL and its subsidiaries, as these entities are part of RIL’s core operations.
CRISIL Ratings has also fully combined the associate companies that are strategically important to RIL, and have significant operational linkages with it. These companies are part of the Reliance Industries Holding Pvt Ltd group, viz. Jamnagar Utilities and Power Pvt Ltd (JUPPL; 'CRISIL AAA/ /Stable/CRISIL A1+') and Sikka Ports & Terminals Ltd (SPTL; 'CRISIL AAA/Stable/CRISIL A1+'). CRISIL Ratings considers these entities as strategic given their strong integration with RIL's oils-to-chemicals operations.
RIL had transferred the fibre and tower assets of RJIL, along with a portion of its liabilities, to two special purpose vehicles (SPVs): Jio Digital Fibre Pvt Ltd (JDFPL; 'CRISIL AAA/Stable/CRISIL A1+') and Summit Digitel Infrastructure Pvt Ltd (SDIPL; 'CRISIL AAA/Stable') that are held by separate trusts outside RIL. While the SPVs operate independently, RJIL has entered into off-take arrangements with these SPVs given the criticality of these assets for its operations. CRISIL Ratings has thus capitalised the present value of a part of payments as per the long-term contracts, as per the applicable accounting standards. CRISIL Ratings has followed a similar approach for contractual obligations made to Pipeline Infrastructure Ltd (PIL; 'CRISIL AAA/Stable').
Pass-through certificates (PTCs) issued by First Business Receivables Trust ('CRISIL AAA(SO)/Stable'), under a securitisation transaction originated by RIL, have been added to debt.
Deferred payment liabilities of RJIL towards the Department of Telecommunication (DoT) for acquisition of spectrum too, has been considered as debt.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Leadership and strong competitiveness in the O2C business in India RIL has combined its refining and petrochemicals business into an integrated O2C segment. The company is amongst the top global petrochemical manufacturers. It is the world’s largest integrated producer of polyester, world’s third largest producer of paraxylene and among the top five global producer of purified terephthalic acid (PTA) and polypropylene. In India, RIL accounts for nearly half of the total domestic cracker (ethylene) capacity and has a production share of more than 50% in the polymers (PE, PP and PVC) market. Its strong market position helps it operate its petrochemical plants at full capacity and also benefits from its large scale.
RIL operates one of the largest ethane transportation facility, which enables a sizeable procurement of ethane from North America. This provides RIL significant feedstock flexibility for its balanced cracker portfolio comprising heavy (naphtha) and light feed (ethane, ROGC) crackers. Moreover, its Refinery Off-Gas cracker (ROGC) project enables the use of off-gas, which is a by-product of its refinery.
RIL's competitive advantage in refining arises from its global-scale capacity as the largest single-site refinery in the world, broad product portfolio, and highly integrated operations. With a crude refining capacity of 1.4 million barrels per day (mbpd), RIL is a significant player in the domestic oil refining market with a refining capacity share of about 27%. Both refineries of the company have consistently maintained high utilisation levels over the years. The Jamnagar site benefits from a superior Complexity Index (CI) of 21.1, which makes it amongst the most complex in the world, enabling RIL to process crudes of varying specific gravity and sulphur content.
High utilisation of the refineries helps maintain strong operating efficiency and healthy profitability. In addition, RIL's proximity to oil fields in West Asia (its facilities are located along India's western coast) gives it a logistical advantage, as it helps control transportation cost in procuring crude and exporting refined products.
RIL also operates a country-wide network of 1,821 fuel retail outlets through Reliance BP Mobility Limited (RBML), operating under brand Jio-bp.
Alongside reinforcing network presence to leverage growth in conventional fuels, RBML has also strengthened the foundation in low carbon fuels. It has emerged as the leading retailer of both high methane compressed Bio-gas and public EV charging infrastructure. Under Jio-bp Pulse, RBML has grown network to 5,164 live charging points at 520 unique sites with industry leading charger uptime. This includes 27 of India’s largest charging hubs with >100 charging points. Under Clean N Green, RBML has expanded CBG network to 28 sites retailing Bio-CNG manufactured at RIL’s 7 digestors. RBML is also ramping up its network of CNG outlets.
RIL's strong competitive advantage has been enhanced by improved energy efficiency contributed by its pet-coke gasification project set up. In the long term, RIL plans to maximize downstream and reduce transportation fuels footprint in a phased manner, to hedge the risk of flagging demand for automotive fuels.
Strong market position in the retail segment RRVL continues to consolidate its position as India’s largest retailer by revenue, scale and profits. The company’s strong market position is reflected in its leadership position across several formats and has been supported by consistent revenue and profit growth. The company has been expanding its footprint by adding stores, expanding reach of its digital and new commerce platforms and enhancing product and service offerings. It is widely spread in tier-2 and tier-3 cities, with a network of 18,946 stores as on September 30, 2024.
Sustained market share leadership in telecom RJIL, subsidiary of Jio Platforms Ltd (JPL; CRISIL A1+), has leadership position in terms of subscriber and revenue market share in the Indian telecom industry. As per TRAI data, RJIL had overall wireless subscriber market share of ~41%, as of July 2024. Moreover, for quarter ended June 2024, RJIL had revenue market share of ~40% in terms of adjusted gross revenue.
RJIL purchased spectrum worth ~Rs 974 crore during the previous auction held in June 2024. Post the auction, RJIL’s total owned spectrum footprint has increased significantly to 26,801 megahertz (MHz) (uplink + downlink), which is the highest in India. Besides, the company also has access to an extensive network of telecom towers and optical fibre network in the country. This, along with the acquisition of spectrum in premium 700 MHz band in the auction held in August 2022 would help the company to provide superior quality of services and enhanced coverage across circles, results in better operating efficiency.
Rising data usage along with broad-based tariff hikes in July 2024 and adoption of 5G services should continue to drive ARPU in the near term, thereby boosting further growth in revenue as well as operating profit.
Exceptional financial flexibility RIL's financial flexibility is demonstrated by its ability to raise resources by tapping the capital markets and through its large cash and liquid investments. Financial flexibility is also supported by unutilised bank lines.
RIL in its AGM for fiscal 2022 announced significant investments of ~Rs 75,000 crore over next few years in new energy segment which have been factored in by CRISIL Ratings. .. RIL is building an integrated solar production facilities, which includes modules, cells, glass, wafer, ingot, and polysilicon, with an initial annual capacity of 10GW. Further, company has begun construction of an integrated advanced chemistry-based battery manufacturing facility with a 30GWh annual capacity at Jamnagar. The company is also rapidly scaling up investment in bio energy and plans to reach 55 integrated CBG plants in medium term.
Company has also begun work on establishing a fully-automated, multi-GW electrolyser manufacturing facility on the west coast of India. This giga-factory will be fully adaptable, capable of supporting various technologies such as Alkaline, PEM, and AEM.
The company has a strong financial risk profile underpinned by stable, healthy profitability, and strong debt protection metrics.
Weaknesses: Exposure to regulatory and technological risks in the telecom sector Regulatory and policy changes have played a central role in defining the risk characteristics of the Indian telecom sector, which is structurally dynamic. The telecom industry also remains susceptible to technological changes, with capex cycles every 8-10 years. New technology in the telecom industry necessitates fresh investments or overhaul of existing networks. For instance, with the launch of 5G services, players were required to significantly invest in laying networks even after incurring significant capex for 4G networks just few years preceding that.
High competitive intensity in the retail sector RRVL faces competition from other organised retailers, some of which have stores in catchment areas that overlap with its stores. Furthermore, with organised retail penetration in India being modest at below 15%, players face intense competition from the unorganised sector, which operates in various addressable markets. However, India's unorganised retail sector is fragmented and plagued by operational inefficiency. Reliance Retail's New Commerce initiative connects millions of small kirana and merchants across India with suppliers, manufacturers, and brands. It enables businesses to become more efficient and offers them a compelling value proposition to grow their businesses and earnings and thus benefit all players in the retail value chain. |
Liquidity: Superior Liquidity should remain robust owing to the exceptional financial flexibility, given the company’s resource-raising ability from capital markets, and sizeable cash and liquid investments (Rs 219,899 crore as on September 30, 2024) at a consolidated level. Moreover, financial flexibility remains supported by sizable bank lines, which usually remain moderately utilised. Sufficient cash accrual, and cash & cash equivalents should be adequate to meet maturing debt as well a portion of the capex requirement. Ample liquidity and strong cash flow from operations shall aid in meeting the capex requirement.
Environment, social and governance (ESG) profile CRISIL Ratings believes that RIL’s ESG profile supports its already strong credit risk profile. Oil to chemical segment contributes significantly to RIL’s business mix. This segment has a significant carbon footprint and has a material impact on the environment. Recognizing climate change as a global threat, RIL is developing solutions for decarbonization and harnessing innovative technologies to combat it. RIL is investing in renewables and alternative energy to provide affordable green energy while prioritizing the collective well-being of humanity.
Key ESG highlights: Company has set the target to achieve net carbon status by year 2035.
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Outlook: Stable CRISIL Ratings believes RIL's credit risk profile will continue to be supported by the highly integrated operations in the core business of O2C, healthy profitability in its digital and retail businesses, and exceptional liquidity. |
Rating Sensitivity Factors Downward Factors
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About the Company RIL is one of India's largest private sector companies, with diverse interests, including petrochemicals, oil refining, and upstream oil and gas exploration and production. RIL has strong competitiveness in the global oil refining and petrochemicals business, arising from its integrated business model with superior Complexity Index of 21.1 for its Jamnagar site, which makes it amongst the most complex sites in the world. RIL has also established its presence in the consumer facing business space by providing retail and digital services, which currently is RIL's principal growth drivers. RRVL is India's largest retail entity by revenue, while RJIL has also become India's largest telecom service provider by revenue market share. The group is also in the process of establishing itself in the green energy space. |
Key Financial Indicators
*Debt including deferred spectrum payments and lease liabilities |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
^Fund based facilities are fungible with non-fund based facilities Annexure - Details of Rating Withdrawn
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Annexure – List of entities consolidated
*Considered in line with CRISIL Ratings’ analytical approach (not consolidated by RIL) |
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#Fund based facilities are fungible with non-fund based facilities and vice-versa