CRISIL has assigned its rating of ‘P1+’ to Reliance Ports and Terminals Ltd’s (RPTL’s) letter of credit/bank guarantee facility aggregating to Rs.6 billion, and has reaffirmed the outstanding ratings on the company’s long-term debt and bank facilities at ‘AAA/Stable’. CRISIL’s ratings continue to reflect RPTL’s strategic importance to Reliance Industries Ltd (RIL, rated ‘AAA/Stable/P1+’ by CRISIL). RPTL is expected to generate superior cash flows on the back of high utilisation of its facilities under throughput agreements with RIL, coupled with its strong operating efficiency and proximity to RIL’s refineries in Jamnagar. These rating strengths are partially offset by the decline in the proportion of revenues that RPTL derives from its throughput agreement with RIL.

RPTL merged nine group companies with itself (effective from April 1, 2008 onwards), in order to consolidate its logistics, engineering, and construction-related services businesses. Of the nine companies, four provide logistics, pipeline, and engineering-related services to RIL, and the remaining are investment holding companies.

The merger has reduced the proportion of revenues RPTL derives from RIL under the throughput agreement with RIL; nevertheless, profitability and cash flows from these throughput agreements continue to form a significant proportion of the merged entity’s profitability and cash flows. Investments in, and loans and advances to, the group companies form a significant proportion of the capital employed of the company. However, the overall debt levels have not increased significantly on account of the merger.

CRISIL believes that there will not be any significant increase in RPTL’s overall debt levels, except for the routine borrowings for maintenance and expansion works for the core business of port operations and logistics. This premise is central to the rating.

Outlook: Stable
CRISIL believes that RPTL will remain strategically important to RIL. The outlook may be revised to ‘Negative’ in case of a significant increase in RPTL’s debt levels, or significant erosion in its margins.

About the Company
RPTL was formed in 1997 with equity contributions from group companies of the Reliance group. RPTL provides port, storage, handling, and evacuation facilities to RIL, India’s largest private sector company. RIL is into diverse businesses: petrochemicals, oil refining, and oil and gas exploration and production. For 2009-10 (refers to financial year, April 1 to March 31), RIL reported a profit after tax (PAT) of Rs.162 billion on net sales of Rs.1.92 trillion, against a PAT of Rs.153 billion on net sales of Rs.1.42 trillion for the previous year.