Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings on the bank facilities and debt instruments of Jamnagar Utilities and Power Private Limited (JUPPL; part of the Reliance Industries Holdings Pvt Ltd [RIHPL] group). The issuer rating is also reaffirmed at ‘CRISIL AAA/Stable’.

 

The ratings continue to take comfort from the strong operational linkages of the entities of the RIHPL group with Reliance Industries Ltd (RIL; rated ‘CRISIL AAA/Stable/CRISIL A1+’), their robust financial flexibility driven by holding of 104.36 crore and 112.76 crore fully paid equity shares of RIL and Jio Financial Services Ltd (JFSL) respectively that are cumulatively worth over Rs 3,70,000 crore as on July 8, 2024, and support from the promoter group of RIL. The ratings also factor in the stable cash accruals of RIHPL group and ability to timely refinance/repay the debt availed. These strengths are partially offset by the group’s high consolidated debt.

 

As on June 30, 2024, the group invested Rs 37,956 crores in interest-bearing loans/units in Digital Fibre Infrastructure Trust (DFIT), the InvIT (Infrastructure Investment Trust) holding telecom infrastructure through its special purpose vehicle (SPV) namely Jio Digital Fibre Private Limited (JDFPL; rated ‘CRISIL AAA/Stable/CRISIL A1+’). Furthermore, the group has also invested Rs 2,416 crore in Intelligent Supply Chain Infrastructure Trust (ISCIT), the InvIT holding warehousing infrastructure through its SPV, Intelligent Supply Chain Infrastructure Management Pvt Ltd. These long term investments have resulted in sizeable interest/dividend income for the RIHPL group in fiscal 2024 which shall continue over the medium term as well.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of JUPPL, Sikka Ports & Terminals Ltd (SPTL; 'CRISIL AAA/Stable/CRISIL A1+'), RIHPL, and other entities under its control. All these entities, collectively referred to as the RIHPL group, have common ownership, significant business linkages with RIL, and fungible cash flows.

 

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:

Strong operational linkages with RIL

The entities of the RIHPL group belong to the promoters and promoter group of RIL. The operations of these entities are critical for RIL, as they are closely integrated with the facilities of its refining and petrochemical complex in Jamnagar, Dahej and Hazira, all in Gujarat.

 

JUPPL has a generation capacity of about 2,300 megawatt (MW) of electricity and about 10,000 tonne per hour (tph) of steam. Its power plants in Jamnagar, Hazira, and Dahej are captive to the existing petrochemicals and refining business of RIL and caters to most of its power requirement.

 

SPTL provides port and marine infrastructure services at village Sikka, district Jamnagar for handling crude and evacuation of petroleum and petrochemical products of RIL, through five single-point mooring equipment and six jetty berths, crude and petroleum products storage tanks, and related undersea and on-shore pipelines. It handles a major part of RIL’s refining/petrochemicals volumes. SPTL is also engaged in operating and hiring construction equipment and machinery and is a co-developer of Jamnagar special economic zone (SEZ).

 

Robust financial flexibility and stable cash flows, driven by operational efficiency

The contractual nature of the cash flows of JUPPL and SPTL, along with strong operations, and income earned on financial investments lends stability to the overall cash flows of the group. JUPPL recovers fixed cost based on plant availability, and fuel is supplied by RIL; while SPTL’s revenues are based on volumes handled. Moreover, the group also earns a stable interest income on its sizeable investments in DFIT and ISCIT.

 

The group has strong operating efficiency, reflected in JUPPL consistently achieving an average plant availability factor (PAF) of more than 90%, and port facilities of SPTL handling volumes of more than 110 million tonne per annum.

 

The expected annual net cash accrual of more than Rs 7,000 crore over the medium term should comfortably cover debt obligation. Financial flexibility is also bolstered by its ownership of 104.36 crore and 112.76 crore unpledged equity shares in RIL and JFSL cumulatively worth over Rs 3,70,000 crore as on July 8, 2024, either directly or indirectly, and the support it derives on being a part of promoter group of RIL. 

 

Weakness:

High consolidated debt

RIHPL’s external debt at a consolidated level, increased to Rs 29,122 crore as on March 31, 2024 (from Rs 27,835 crore as on March 31, 2023) owing to increase in interest-bearing investments Nevertheless, the repayments are back-ended with bulk of the repayments due only fiscal 2027 onwards. However, given the stability of cash flows due to the captive nature of operations, the business is expected to comfortably service its debt obligations. Further, the group also has a demonstrated ability to refinance its debt at attractive rates which will support the financial risk profile.

Liquidity: Superior 

The robust financial flexibility of the group is driven by its holding of 104.36 crore and 112.76 crore fully paid equity shares of RIL of JFSL respectively that are cumulatively worth over Rs 3,70,000 crore as on July 8, 2024. Cash and equivalents are likely to continue to be healthy at over Rs 5,000 crore over the medium term. Net cash accrual is expected in excess of Rs 7,000 crore per fiscal over the medium term.

 

Accordingly, healthy cash accruals, existing cash balance and demonstrated ability to refinance the debt should comfortably meet the debt obligation including bulk of the debt of Rs 16,430 crore due for repayment in fiscal 2027.

Outlook: Stable

The credit risk profile of the group is expected to remain healthy, supported by stable profitability, strong operational linkages with RIL, and adequate financial flexibility derived from holding RIL shares

Rating Sensitivity factors

Downward factors

• Significant reduction in the operational linkages with RIL resulting in weakening of operating cashflows on a sustained basis.
• Any material reduction in existing promoter group's shareholding/control (say, below majority) or its support philosophy towards the RIHPL group entities thereby limiting its financial flexibility
• Significant diminution in the value of RIHPL's investments

About the Group

JUPPL operates coal- and gas-based power plants at Jamnagar (both in the domestic tariff area and SEZ), Hazira, and Dahej, having combined capacity of about 2,300 MW of electricity and 10,000 tph of steam for catering to the manufacturing facilities of RIL.

 

SPTL provides port handling, storage and evacuation facilities to RIL in Jamnagar.

 

RIHPL is a holding company belonging to the promoters and promoter group of RIL. Its 100% economic ownership of SPTL, and JUPPL is in addition to the economic interest it holds in RIL’s shares, either directly or indirectly. 

About RIL

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. Reliance Retail Ltd is India's largest retail entity by revenue, while Reliance Jio Infocomm Ltd 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 - RIHPL (consolidated)

Particulars	Unit	2024	2023
Revenue	Rs.Crore	9,900	9,566
Profit After Tax (PAT)	Rs.Crore	4,917*	2,658*
PAT Margin	%	49.7%	27.8%
Adjusted Debt/EBITDA	Times	2.8	3.0
Adjusted Interest coverage	Times	3.3	3.5

*Includes interest income earned from investments undertaken

Any other information: Not Applicable

Annexure - Details of Instrument(s)

ISIN	Name of Instrument	Date of Allotment	Coupon Rate (%)	Maturity Date	Issue Size (Rs Crore)	Complexity Level	Rating Assigned with Outlook
INE936D07075	Non Convertible Debentures	04-Aug-2014	9.75%	02-Aug-2024	2,000	Simple	CRISIL AAA/Stable
INE936D07174	Non Convertible Debentures	29-Sep-2021	6.40%	29-Sep-2026	4,000	Simple	CRISIL AAA/Stable
INE936D07182	Non Convertible Debentures	10-Aug-2023	7.90%	10-Aug-2028	3350	Simple	CRISIL AAA/Stable
NA	Non Convertible Debentures#	NA	NA	NA	650	Simple	CRISIL AAA/Stable
NA	Commercial Paper	NA	NA	7-365 days	4,000	Simple	CRISIL A1+
NA	Working Capital facility	NA	NA	NA	535	NA	CRISIL AAA/Stable
NA	Cash Credit/Overdraft facility	NA	NA	NA	50	NA	CRISIL AAA/Stable
NA	Non Fund based limit	NA	NA	NA	70	NA	CRISIL A1+
NA	Term Loan	31-Mar-2023	T-Bill linked	31-Mar-2028	1,800	NA	CRISIL AAA/Stable
NA	Proposed Fund-Based Bank Limits	NA	NA	NA	1,862	NA	CRISIL AAA/Stable

#Yet to be placed