Rating Rationale
October 01, 2018 | 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.10000 Crore Non Convertible Debentures CRISIL AAA/Stable (Assigned)
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.30000 Crore Commercial Paper CRISIL A1+ (Reaffirmed)
Rs.4500 Crore Commercial Paper CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has assigned the rating of 'CRISIL AAA/Stable' to Rs. 10,000 crore NCDs of of Reliance Industries Limited (RIL), while reaffirming the ratings of existing debt instruments and bank facilities at 'CRISIL AAA/Stable/CRISIL A1+'.
The ratings continue to reflect RIL's leadership in the petrochemicals industry in India, strong competitiveness in the global oil refining business, 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, and other group and associate companies, which are strategically important to, and have a significant degree of operational integration with RIL. These companies are Jamnagar Utilities and Power Private Limited (JUPPL; Formerly Reliance Utilities And Power Private Limited, rated 'CRISIL AAA/CCR AAA/Stable/CRISIL A1+' by CRISIL), Reliance Utilities Pvt Ltd, 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 AAA/Stable/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.

Key Rating Drivers & Detailed Description
* Leadership in petrochemicals industry in India
RIL is among the top 10 global petrochemical manufacturers, and commands a share of over 30% in the domestic polymer market and about 50% in the polypropylene 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 will add 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%. 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. 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. Gross refining margins have consistently been better than benchmark Singapore gross refining 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.

* 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 of Rs 79,492 crore as on June 30, 2018, at the consolidated level. The Company's Strong financial flexibility is also supported by unutilised bank lines. It has bank facilities of Rs 60,000 crore, of which about half are non-fund-based. The company has a strong financial profile underpinned by stable, healthy profitability, robust debt protection metrics and gearing of less than 1 times. The company is approaching the end of its large capex plan in its petrochemical & refining and telecom segments. This capital expenditure is mainly to strengthen its refinery and petrochemicals business and in the pan-India telecom and broadband services through Reliance Jio Infocomm Ltd (RJIL, rated 'CRISIL AAA/CRISIL AAA(SO)/Stable'/CRISIL A1+).

* 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 Q1 FY 2019 was at 4.1 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 are likely to decline further in the near term with production at RIL's MA fields in the KG D6 basin ceasing production in September 2018. CRISIL believes that lower-than-expected 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 announced three projects along with BP to produce deep-water gas in its KGD6 block at a cost of about Rs. 40,000 crore. The company expects to produce about 30-35 mmscmd gas from these projects by 2022.    

* Exposure to an intensely competitive telecom sector  
RIL is also exposed to highly competitive telecom business- RIL's subsidiary, Reliance Jio Infocomm Limited (RJIL), which has rolled out a pan-India 4G LTE telecom network and other digital services at an investment of over Rs. 225,000 crore. The Indian telecom space has well-entrenched players such as Bharti Airtel Ltd ('CRISIL AA+/Negative/CRISIL A1+'), and Vodafone India Ltd ('CRISIL AA-/Negative/CRISIL A1+'), 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.

RJIL entered the Indian telecom space by offering voice and high speed internet services through a combination of existing and new technologies, including long-term evolution (LTE). CRISIL believes that RIL is uniquely placed with respect to offering LTE telecom services as it is the only player with pan-India liberalised spectrum across different spectrum bands, including sub-GHZ LTE band, and a unified licence to offer new-age LTE services. RJIL has spectrum in the 800 MHz, 1800 MHz and 2300 MHz across all the 22 circles of the country, all of which spectrum is being used to offer LTE services. The company has acquired over 215 million subscribers by June 30, 2018, with strong growth in customer base ' reflected in increase in market share to 19% as on June 30 2018, from 10% as on June 30, 2017. Despite the healthy acquisition of customers till now, the company's profitability going ahead depends on its ability to improve ARPUs while also continuing growth in customer base, which will remain key monitorables.

CRISIL has taken note of the definitive agreement for the acquisition of specified assets of Reliance Communications Limited ('RCom') by RIL's telecom subsidiary, Reliance Jio Infocomm Ltd (RJIL). CRISIL has also taken note of the strategic importance of this acquisition, as it will contribute to the roll-out of RJio's Fiber to Home and Enterprise services. CRISIL expects increase in debt levels at RIL consolidated level on account of this acquisition. Nevertheless, the consideration paid by the company will be partly offset by incremental cash accruals as a result of the assets acquired and the reduction in future capex towards telecom towers and optical fiber network.

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. The company has announced the sale of its 60% interest in shale acreage with Carrizo's Marcellus for USD 126 million in October 2017, and the sale of select assets in the Eagle Ford Shale play in the USA for USD 100 million in March 2018.

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 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 10,000 CRISIL AAA/Stable
INE002A08500 Debenture 08-Nov-17 7.17% 08-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
INE002A07601 Debenture^ 17-Jun-02 9.25% 17-Jun-14 500 CRISIL AAA/Stable
INE002A07619 Debenture^ 27-Jun-02 9.25% 27-Jun-14 500 CRISIL AAA/Stable
INE002A07684 Debenture^ 20-Dec-02 6.45% 20-Dec-12 170 CRISIL AAA/Stable
INE002A07692 Debenture 24-Nov-03 6.25% 24-Nov-18 800 CRISIL AAA/Stable
INE006A07073 Debenture^ 01-Apr-06 0% 01-Jan-13 110 CRISIL AAA/Stable
INE006A07081 Debenture^ 01-Apr-06 0% 30-Jun-13 49 CRISIL AAA/Stable
INE006A07123 Debenture^ 01-Apr-06 0% 31-Mar-15 52 CRISIL AAA/Stable
INE006A07099 Debenture^ 01-Apr-06 0% 31-Dec-12 13 CRISIL AAA/Stable
INE006A07107 Debenture^ 01-Apr-06 0% 06-May-15 31 CRISIL AAA/Stable
INE002A07700 Debenture^ 25-Nov-08 11.45% 25-Nov-13 840 CRISIL AAA/Stable
INE002A07718 Debenture^ 25-Nov-08 11.45% 25-Nov-13 668 CRISIL AAA/Stable
INE002A07726 Debenture 08-Dec-08 10.75% 08-Dec-18 370 CRISIL AAA/Stable
INE002A07767 Debenture^ 10-Dec-08 11.90% 10-Dec-13 5000 CRISIL AAA/Stable
INE002A07742 Debenture^ 12-Dec-08 10.10% 12-Dec-11 405 CRISIL AAA/Stable
INE002A07775 Debenture 07-May-10 8.75% 07-May-20 500 CRISIL AAA/Stable
NA Commercial Paper NA NA 7-365 days 30,000 CRISIL A1+
NA Commercial Paper NA NA 7-365 days 4,500 CRISIL A1+
NA Fund-Based Facilities* NA NA NA 49965 CRISIL AAA/Stable
NA Rupee Term Loan^ NA NA Apr-18 35 CRISIL AAA/Stable
NA Proposed Long Term
Bank Loan Facility
NA NA NA 15000 CRISIL AAA/Stable
%Yet to be issued
*Fully interchangeable between bank guarantee, letter of credit, export packing credit, and post-shipment credit
^CRISIL is awaiting independent confirmation of redemption before withdrawing ratings on these instruments
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  34500.00  CRISIL A1+  21-05-18  CRISIL A1+  01-11-17  CRISIL A1+  28-10-16  CRISIL A1+  28-10-15  CRISIL A1+  CRISIL A1+ 
        16-04-18  CRISIL A1+  08-08-17  CRISIL A1+      05-10-15  CRISIL A1+   
        26-02-18  CRISIL A1+  25-07-17  CRISIL A1+           
        09-01-18  CRISIL A1+               
Non Convertible Debentures  LT  21670.00
CRISIL AAA/Stable  21-05-18  CRISIL AAA/Stable  01-11-17  CRISIL AAA/Stable  28-10-16  CRISIL AAA/Stable  28-10-15  CRISIL AAA/Stable  CRISIL AAA/Stable 
        16-04-18  CRISIL AAA/Stable  08-08-17  CRISIL AAA/Stable      05-10-15  CRISIL AAA/Stable   
        26-02-18  CRISIL AAA/Stable  25-07-17  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+  28-10-15  CRISIL A1+  CRISIL A1+ 
        26-02-18  CRISIL A1+  08-08-17  CRISIL A1+      05-10-15  CRISIL A1+   
        09-01-18  CRISIL A1+  25-07-17  CRISIL A1+           
Fund-based Bank Facilities  LT/ST  65000.00  CRISIL AAA/Stable  21-05-18  CRISIL AAA/Stable  01-11-17  CRISIL AAA/Stable  28-10-16  CRISIL AAA/Stable  28-10-15  CRISIL AAA/Stable  CRISIL AAA/Stable 
        16-04-18  CRISIL AAA/Stable  08-08-17  CRISIL AAA/Stable      05-10-15  CRISIL AAA/Stable   
        26-02-18  CRISIL AAA/Stable  25-07-17  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* 49965 CRISIL AAA/Stable Fund-Based Facilities* 49965 CRISIL AAA/Stable
Proposed Long Term Bank Loan Facility 15000 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 rating short term debt

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