Rating Rationale
March 05, 2019 | Mumbai
Reliance Industries Limited
'CRISIL AAA/Stable' assigned to NCD
Rating Action
Total Bank Loan Facilities Rated Rs.65000 Crore
Long Term Rating CRISIL AAA/Stable (Reaffirmed)
Rs.8000 Crore Non Convertible Debentures CRISIL AAA/Stable (Assigned)
Rs.2000 Crore Non Convertible Debentures CRISIL AAA/Stable (Reaffirmed)
Rs.10000 Crore Non Convertible Debentures CRISIL AAA/Stable (Reaffirmed)
Rs.10000 Crore Non Convertible Debentures CRISIL AAA/Stable (Reaffirmed)
Rs.10000 Crore Non Convertible Debentures CRISIL AAA/Stable (Reaffirmed)
Non-Convertible Debentures Aggregating Rs.10008 Crore CRISIL AAA/Stable (Reaffirmed)
Rs.34500 Crore Commercial Paper CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
The common independent director on CRISIL's and RIL's boards did not participate in the rating committee meeting and the rating process of these instruments.
Detailed Rationale

CRISIL has assigned its 'CRISIL AAA/Stable' rating to Rs 8,000 crore Non-Convertible Debentures of Reliance Industries Limited (RIL), while reaffirming the ratings on its existing debt instruments and bank facilities at 'CRISIL AAA/Stable/CRISIL A1+'.
Consequent to redemption, CRISIL has also withdrawn its rating on non-convertible debentures of Rs 9508 crore and term loan of Rs.35 crore (See Annexure Details of rating withdrawn for details) in line with its withdrawal policy. CRISIL has received independent confirmation that these instruments are fully redeemed.
The ratings continue to reflect RIL's leadership in the petrochemicals industry in India, strong competitiveness in the global oil refining business, leadership position attained by Reliance Jio Infocomm Limited (RJIL) in terms of its 4G mobile broadband subscriber base and exceptional financial flexibility. These strengths are partially offset by RIL's exposure to risks relating to reducing gas volumes at its largest gas production field, the Krishna-Godavari D6 (KG-D6) and exposure to an intensely competitive telecom industry.

Analytical Approach

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of RIL with its subsidiaries, RJIL (rated 'CRISIL AAA/CRISIL AAA(SO)/Stable/CRISIL A1+'), and Reliance Retail Ltd (RRL, rated 'CRISIL AAA/Stable/CRISIL A1+') as these entities are a part of core operations of RIL.

CRISIL has also fully consolidated its group companies which are strategically important to RIL, and have a significant degree of operational integration with it. These companies are Jamnagar Utilities and Power Pvt Ltd (Formerly Reliance Utilities & Power Pvt Ltd) (JUPPL, rated 'CRISIL AAA/CCR AAA/Stable/CRISIL A1+'), Sikka Ports & Terminals Ltd (Formerly Reliance Ports and Terminals Ltd) (SPTL, 'CRISIL AAA/Stable/CRISIL A1+'), East West Pipeline Ltd (Formerly Reliance Gas Transportation Infrastructure Ltd) (EWPL, CRISIL A1+'), and Reliance Industries Holding Pvt Ltd. CRISIL considers these entities as being strategic to RIL in view of their strong integration with RIL's Jamnagar, Hazira, and KG D6 operations. Further, CRISIL has also combined the financials of RIL's subsidiaries to reflect the operational or financial linkages with these entities.

RJIL has recently announced the transfer of its fibre and tower assets, along with a portion of liabilities, into two separate Special Purpose Vehicles (SPVs). Post conclusion of the transfer process, RJIL will enter into long term lease agreements with the SPVs holding tower & fiber assets. CRISIL will take the final analytical view on the same following the restructuring becoming effective and finalization of financial statements.

Deferred payment liabilities at RJIL, payable to the Department of Telecommunication (DoT) for acquisition of spectrum stood at Rs 19,745 crore as on 30th September, 2018. These deferred payment liabilities have been considered as debt. 

Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description
* Leadership in petrochemicals industry in India
RIL is among the top 10 global petrochemical manufacturers. In India, RIL accounted for over 45 percent of the total domestic cracker (ethylene) capacity, and had a production share of about 50 percent in the polymers (PE, PP and PVC) market. Its strong market position helps it operate its petrochemical plants at full utilisation and benefit from its large scale of operations and high level of vertical integration. These operating efficiencies support RIL's strong profitability in the petrochemicals segment.

RIL has recently commissioned the world's largest ethane cracker project, the final phase of its Para-xylene project, and its Refinery off-gas cracker (ROGC) and downstream projects. These projects have added further value to the company's petrochemical business. Operating efficiencies will likely benefit from these projects, resulting in further integration benefits over the medium term.

* Strong competitiveness in the global oil refining business
RIL's competitive advantage in refining arises from its global-scale capacity, broad product portfolio, and highly integrated operations. With a combined capacity of about 62 million tonne per annum (mtpa), RIL is a significant player in the domestic oil refining market, with a refining capacity share of about 27% as on March 31, 2018. Both the company's refineries, with capacities of 33 mtpa and 29 mtpa, have consistently maintained high utilisation levels of 110% of nameplate capacity, over the years, and benefit from superior Nelson Complexity Index (NCI) configurations of 11.3 and 14.0, respectively, which make them among the most complex in the world. High utilisation levels of the refineries help 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, which helps it control transportation costs in procuring crude and exporting refined products. Although gross refining margins (GRMs) have moderated in the recent past, they have consistently been better than benchmark Singapore margins. CRISIL believes RIL's strong competitive advantage in global oil refining will be further enhanced owing to improved energy-efficiency by the pet-coke gasification project, for which pre-commissioning is underway.

* RJIL's leadership in 4G mobile broadband, supported by strong customer addition
The 4G mobile broadband subscriber base in India was 500 million in December 2018, of which RJIL has a leading market share of 56%. Overall, for wireless telecom services, RJIL has increased its subscriber market share from 14% in December 2017 to 24% in December 2018, adding 120 million subscribers (10 million per month). RJIL has achieved leadership position in revenue market share across 11 circles till September 2018. The strong pace in customer acquisitions is expected to continue.

RJIL has a large, liberalised spectrum holding of 1,108 megahertz (MHz), which can be used for rolling out any technology without any regulatory restriction. CRISIL believes that RJIL is uniquely placed with respect to offering LTE telecom services as it has pan-India liberalized spectrum across different spectrum bands (800 MHz, 1800 MHz and 2300 MHz), including sub-GHz LTE band, and license to offer new-age LTE services. The company has also deployed an extensive network of telecom towers and optical fibre network in the country. This, along with absence of any legacy technology results in better operating efficiencies.

RIL has recently acquired stakes in content creating companies, and ventured into Fiber-to-the-home (FTTH), for which it has also acquired Den Networks Ltd & Hathway Cables & Datacom Ltd. These are likely to provide additional cash flow streams to the group over the medium term.

* Exceptional financial flexibility
RIL derives its financial flexibility from its demonstrated resource-raising ability in tapping the capital markets, and from its large cash and liquid investments. The company's strong financial flexibility is also supported by unutilised bank lines. The company has a strong financial profile underpinned by stable, healthy profitability, robust debt protection metrics and gearing of less than 1x. The company is approaching the end of its large capex plan in its petrochemical & refining segment while capex in its telecom segment is expected to remain elevated in the near to medium term. This capital expenditure is mainly to strengthen its refinery and petrochemicals business and in the pan-India telecom and broadband services through RJIL.

* Reducing volumes at the Krishna-Godavari D6 (KG-D6) gas producing field
The company's exploration and production (E&P) segment has been adversely affected by reduced gas output from its KG-D6 field. There has been a significant drop in RIL's gas production' average production from its KG-D6 block during Q3 FY 2019 was about 2 mmscmd, down from about 12 mmscmd production levels from fiscal 2014 to fiscal 2016, which was in turn significantly lower than 26 mmscmd during 2012-13. Gas volumes have decline from about 3.7 mmscmd in previous quarter, with production at RIL's MA fields in the KG D6 basin ceasing production in September 2018. CRISIL believes that low gas output from KG-D6 will affect RIL's return on investments in the E&P segment over the medium term. In June 2017, RIL had announced three projects along with BP to produce deep-water gas in its KGD6 block at a cost of about Rs. 40,000 crore. Higher than expected capex will be a monitorable. The company expects to produce about 30-35 mmscmd gas from these projects by 2022.   

* Exposure to competitive pressures and regulatory risks in the telecom sector  
Given that RJIL is a key strategic investment of the group, RIL is also exposed to highly competitive telecom business. The Indian telecom space has well-entrenched players such as Bharti Airtel Ltd ('CRISIL AA/Stable/CRISIL A1+'), and Vodafone Idea Ltd ('CRISIL A+/Negative'), from whom the company continues to face significant competitive pressures. These command a sizeable revenue share in the market and have been in operation for more than a decade.

Regulatory and policy changes have also played a central role in defining the risk characteristics of the Indian telecom industry. There has been significant improvement in the overall clarity of regulations over the past few years, translating into an improved operating environment for the Indian telecom operators. However, the sector is extremely dynamic structurally and technologically; thus the risks pertaining to continued regulatory intervention are likely to persist. CRISIL continues to monitor the regulatory developments in this field.

RIL has a strong liquidity position, owing to its exceptional financial flexibility, given its demonstrated resource-raising ability from the capital markets, and its large cash and liquid investments of Rs 77,933 crore as on December 31, 2018 at a consolidated level. Moreover, the company's financial flexibility is also supported by unutilized bank lines. The company has debt repayment obligations of about Rs 15,000 crore in FY 2020 while its capex incurred should be high. CRISIL believes the company has sufficient accruals and cash & cash equivalents to meet its repayment obligations and partly finance its capex requirements.

Outlook: Stable

CRISIL believes that RIL's credit risk profile will continue to be supported over the medium term by its highly integrated operations in its core businesses of oil refining and petrochemicals, its large scale of operations, and its exceptional liquidity.

Downside scenario
* Significantly lower than expected returns from ongoing and recently completed capital expenditures 
* Considerably large, debt-funded capex or acquisition which weakens the company's capital structure.

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 E&P. Oil refining is RIL's largest activity, accounting for around 56% of the revenue in fiscal 2018, followed by petrochemicals at around 23% (both before interparty transactions). In the recent past, RIL has diversified into newer businesses which includes telecommunications and organized retail.

RIL has different joint venture agreements for development of shale gas reserves in the US. These include agreements with Atlas Energy Inc (Atlas; acquired by Chevron Corporation during 2012-13) for a 40% working interest (WI) partnership in Atlas's Marcellus shale acreage; and with Pioneer Natural Resources Company, USA (Pioneer; rated 'BBB/Stable' by S&P Global Ratings), for a 45% WI partnership in Pioneer's Eagle Ford shale acreage.

Key Financial Indicators (Consolidated)
As on/for the period ended March 31 Unit 2018 2017
Revenue Rs crore 408,265 330,180
Profit After Tax (PAT) Rs crore 36,080 29,833
PAT Margins % 8.8% 9.0%
Interest coverage Times 8.0 12.1
Adjusted debt/adjusted networth Times 0.8 0.8

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs.Cr) Rating Assigned with Outlook
NA Debenture% NA NA NA 8,000 CRISIL AAA/Stable
NA Debenture% NA NA NA 2,000 CRISIL AAA/Stable
NA Debenture% NA NA NA 3,500 CRISIL AAA/Stable
INE002A08534 Debenture 17-Oct-18 9.05% 17-Oct-28 3,500 CRISIL AAA/Stable
INE002A08542 Debenture 9-Nov-18 8.95% 9-Nov-28 3000 CRISIL AAA/Stable
INE002A08500 Debenture 8-Nov-17 7.17% 8-Nov-22 5,000 CRISIL AAA/Stable
INE002A08518 Debenture 14-Nov-17 6.95% 14-Dec-20 2,500 CRISIL AAA/Stable
INE002A08526 Debenture 22-Nov-17 7.07% 24-Dec-20 2,500 CRISIL AAA/Stable
INE002A08476 Debenture 31-Aug-17 7.00% 31-Aug-22 5,000 CRISIL AAA/Stable
INE002A08484 Debenture 1-Sep-17 6.78% 16-Sep-20 2,500 CRISIL AAA/Stable
INE002A08492 Debenture 4-Sep-17 6.80% 4-Sep-20 2,500 CRISIL AAA/Stable
INE002A07775 Debenture 7-May-10 8.75% 7-May-20 500 CRISIL AAA/Stable
NA Commercial Paper NA NA 7-365 days 34,500 CRISIL A1+
NA Fund-Based Facilities* NA NA NA 60,000 CRISIL AAA/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 4,965 CRISIL AAA/Stable
%Yet to be issued
*Fully interchangeable between bank guarantee, letter of credit, export packing credit, and post-shipment credit
Annexure - Details of Rating Withdrawn
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs.Cr)
INE002A07601 Debenture 17-Jun-02 9.25% 17-Jun-14 500
INE002A07619 Debenture 27-Jun-02 9.25% 27-Jun-14 500
INE002A07684 Debenture 20-Dec-02 6.45% 20-Dec-12 170
INE002A07692 Debenture 24-Nov-03 6.25% 24-Nov-18 800
INE006A07073 Debenture 1-Apr-06 0% 1-Jan-13 110
INE006A07081 Debenture 1-Apr-06 0% 30-Jun-13 49
INE006A07123 Debenture 1-Apr-06 0% 31-Mar-15 52
INE006A07099 Debenture 1-Apr-06 0% 31-Dec-12 13
INE006A07107 Debenture 1-Apr-06 0% 6-May-15 31
INE002A07700 Debenture 25-Nov-08 11.45% 25-Nov-13 840
INE002A07718 Debenture 25-Nov-08 11.45% 25-Nov-13 668
INE002A07726 Debenture 8-Dec-08 10.75% 8-Dec-18 370
INE002A07767 Debenture 10-Dec-08 11.90% 10-Dec-13 5000
INE002A07742 Debenture 12-Dec-08 10.10% 12-Dec-11 405
NA Rupee Term Loan NA NA Apr-2018 35
Annexure - List of Entities Consolidated
Fully Consolidated Entities
S. No Name of Entity 
1 Reliance Jio Infocomm Ltd
2 Reliance Retail Ltd
3 Sikka Ports & Terminals Ltd
4 East West Pipeline Ltd
5 Jamnagar Utilities & Power Pvt Ltd
6 Reliance Industries Holding Private Limited
7 Adventure Marketing Private Limited
8 AETN18 Media Private Limited
9 Affinity Names Inc.*
10 Aurora Algae Inc.*
11 Aurora Algae Pty Limited*
12 Capital18 Fincap Private Limited
13 Colorful Media Private Limited
14 Colosceum Media Private Limited
15 Digital18 Media Limited
16 Dreketi S.A.*
17 E-18 Limited
18 e-Eighteen.com Limited
19 Equator Trading Enterprises Private Limited
20 Ethane Crystal LLC
21 Ethane Emerald LLC
22 Ethane Opal LLC
23 Ethane Pearl LLC
24 Ethane Sapphire LLC
25 Ethane Topaz LLC
26 Greycells18 Media Limited
27 IBN18 (Mauritius) Limited
28 Independent Media Trust
29 IndiaCast Media Distribution Private Limited
30 IndiaCast UK Limited
31 IndiaCast US Limited
32 Indiawin Sports Private Limited
33 Infomedia Press Limited
34 Jio Information Solutions Limited (Formerly known as Reliance Textiles Limited)
35 Kanhatech Solutions Limited
36 Model Economic Township Limited
37 Moneycontrol Dot Com India Limited
38 Naroda Power Private Limited
39 Network18 Holdings Limited
40 Network18 Media & Investments Limited
41 Network18 Media Trust
42 Panorama Television Private Limited
43 Petroleum Trust
44 RB Holdings Private Limited
45 RB Media Holdings Private Limited
46 RB Mediasoft Private Limited
47 Recron (Malaysia) Sdn. Bhd.*
48 Reed Infomedia India Private Limited
49 Reliance Ambit Trade Private Limited
50 Reliance Aromatics and Petrochemicals Limited
51 Reliance Brands Limited
52 Reliance Chemicals Limited
53 Reliance Clothing India Private Limited
54 Reliance Commercial Dealers Limited
55 Reliance Comtrade Private Limited
56 Reliance Content Distribution Limited
57 Reliance Corporate IT Park Limited
58 Reliance Digital Media Distribution Limited
59 Reliance Eagleford Midstream LLC*
60 Reliance Eagleford Upstream GP LLC*
61 Reliance Eagleford Upstream Holding LP*
62 Reliance Eagleford Upstream LLC*
63 Reliance Eminent Trading & Commercial Private Limited
64 Reliance Energy and Project Development Limited
65 Reliance Energy Generation and Distribution Limited
66 Reliance Ethane Holding Pte Limited
67 Reliance Exploration & Production DMCC*
68 Reliance GAS Lifestyle India Private Limited (Formerly known as Reliance Brands
69 Reliance Gas Pipelines Limited
70 Reliance Global Energy Services (Singapore) Pte Ltd.
71 Reliance Global Energy Services Limited
72 Reliance Holding USA, Inc.*
73 Reliance Industrial Investments and Holdings Limited
74 Reliance Industries (Middle East) DMCC*
75 Reliance Innovative Building Solutions Private Limited
76 Reliance Jio Digital Services Limited
77 Reliance Jio Global Resources LLC*
78 Reliance Jio Infocomm Pte Limited*
79 Reliance Jio Infocomm UK Limited*
80 Reliance Jio Infocomm USA, Inc.*
81 Reliance Jio Infratel Private Limited
82 Reliance Jio Media Limited
83 Reliance Jio Messaging Services Limited
84 Reliance Lifestyle Holdings Limited
85 Reliance LNG Limited
86 Reliance Marcellus II LLC*
87 Reliance Marcellus LLC*
88 Reliance Payment Solutions Limited
89 Reliance Petro Marketing Limited
90 Reliance Polyolefins Limited
91 Reliance Progressive Traders Private Limited
92 Reliance Prolific Commercial Private Limited
93 Reliance Prolific Traders Private Limited
94 Reliance Retail Finance Limited
95 Reliance Retail Insurance Broking Limited
96 Reliance Retail Ventures Limited
97 Reliance Sibur Elastomers Private Limited
98 Reliance SMSL Limited
99 Reliance Strategic Investments Limited
100 Reliance Universal Enterprises Limited
101 Reliance Universal Traders Private Limited
102 Reliance Vantage Retail Limited
103 Reliance Ventures Limited
104 Reliance World Trade Private Limited
105 Reliance-GrandOptical Private Limited
106 Resolute Land Consortium Projects Limited
107 RIL Exploration and Production (Myanmar) Company Limited
108 RIL USA, Inc.*
109 Roptonal Limited
110 RP Chemicals (Malaysia) Sdn. Bhd.*
111 RRB Investments Private Limited
112 RRB Mediasoft Private Limited
113 RRK Finhold Private Limited
114 RVT Finhold Private Limited
115 RVT Media Private Limited
116 Santol Commercials Private Limited
117 Setpro18 Distribution Limited
118 Surela Investment and Trading Private Limited
119 Tangerine Agro Private Limited
120 Television Eighteen Mauritius Limited
121 Television Eighteen Media and Investment Limited
122 TV18 Broadcast Limited
123 Viacom18 Media (UK) Limited
124 Viacom18 Media Private Limited
125 Viacom18 US Inc.
126 Watermark Infratech Private Limited
127 Web18 Holdings Limited
128 Web18 Software Services Limited
*Subsidiary Company with 31st December as its reporting date.
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  34500.00  CRISIL A1+      05-12-18  CRISIL A1+  01-11-17  CRISIL A1+  28-10-16  CRISIL A1+  CRISIL A1+ 
            27-11-18  CRISIL A1+  08-08-17  CRISIL A1+       
            01-10-18  CRISIL A1+  25-07-17  CRISIL A1+       
            21-05-18  CRISIL A1+           
            16-04-18  CRISIL A1+           
            26-02-18  CRISIL A1+           
            09-01-18  CRISIL A1+           
Non Convertible Debentures  LT  27000.00
CRISIL AAA/Stable      05-12-18  CRISIL AAA/Stable  01-11-17  CRISIL AAA/Stable  28-10-16  CRISIL AAA/Stable  CRISIL AAA/Stable 
            27-11-18  CRISIL AAA/Stable  08-08-17  CRISIL AAA/Stable       
            01-10-18  CRISIL AAA/Stable  25-07-17  CRISIL AAA/Stable       
            21-05-18  CRISIL AAA/Stable           
            16-04-18  CRISIL AAA/Stable           
            26-02-18  CRISIL AAA/Stable           
            09-01-18  CRISIL AAA/Stable           
Short Term Debt  ST          16-04-18  CRISIL A1+  01-11-17  CRISIL A1+  28-10-16  CRISIL A1+  CRISIL A1+ 
            26-02-18  CRISIL A1+  08-08-17  CRISIL A1+       
            09-01-18  CRISIL A1+  25-07-17  CRISIL A1+       
Fund-based Bank Facilities  LT/ST  65000.00  CRISIL AAA/Stable      05-12-18  CRISIL AAA/Stable  01-11-17  CRISIL AAA/Stable  28-10-16  CRISIL AAA/Stable  CRISIL AAA/Stable 
            27-11-18  CRISIL AAA/Stable  08-08-17  CRISIL AAA/Stable       
            01-10-18  CRISIL AAA/Stable  25-07-17  CRISIL AAA/Stable       
            21-05-18  CRISIL AAA/Stable           
            16-04-18  CRISIL AAA/Stable           
            26-02-18  CRISIL AAA/Stable           
            09-01-18  CRISIL AAA/Stable           
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Fund-Based Facilities* 60000 CRISIL AAA/Stable Fund-Based Facilities* 49965 CRISIL AAA/Stable
Proposed Long Term Bank Loan Facility 4965 CRISIL AAA/Stable Proposed Long Term Bank Loan Facility 15000 CRISIL AAA/Stable
Rupee Term Loan 35 CRISIL AAA/Stable Rupee Term Loan 35 CRISIL AAA/Stable
Total 65000 -- Total 65000 --
*Fully interchangeable between bank guarantee, letter of credit, export packing credit, and post-shipment credit
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Petrochemical Industry
Rating Criteria for Upstream Oil and Gas Sector
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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