Rating Rationale
January 02, 2018 | Mumbai
Reliance Infrastructure Limited
Ratings revised to 'Watch with Developing Implications'   
Rating Action
Rs.125 Crore Bond CRISIL BBB+ (Revised to 'Rating Watch with Developing Implications' from 'Rating Watch with Negative Implications')
Rs.725.7 Crore Non Convertible Debentures CRISIL BBB+ (Revised to 'Rating Watch with Developing Implications' from 'Rating Watch with Negative Implications')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has revised its ratings watch on the debt programmes of Reliance Infrastructure Limited  (RInfra) to 'Rating Watch with Developing Implications' from earlier 'Rating Watch with Negative Implications'.

The change reflects improved expectation of substantial debt reduction in RInfra, post announcement of sale of its entire power generation, transmission and distribution (GTD) business in Mumbai.

RInfra has signed a binding agreement with Adani Transmission Ltd (ATL) for sale of its Mumbai GTD business. Company plans to utilize the proceeds from the transaction towards reduction of debt. Post transfer, RInfra's business profile will also undergo a shift as Mumbai GTD business contributed nearly 80% of its existing operating profits. Construction and defence businesses have been identified to be RInfra's key growth areas and will determine its overall credit profile going forward.

The transaction remains subject to lenders and regulatory approval. While CRISIL believes that there is greater likelihood of the deal closure, however given its size and complexity, timelines remain a key monitorable. Additionally CRISIL will continue to engage with management on its various debt reduction plans and its future business strategies. Final rating view and removal of Watch will remain contingent upon these clarities. Continued delays in debt reduction may constrain company's credit profile over the medium term.

Analytical Approach

For arriving at the ratings, CRISIL has moderately integrated its SPVs which are largely owned by RInfra. While RInfra is looking to exit most of its developmental projects however CRISIL expects the company to support any cost overruns or shortfall in debt servicing in these SPVs.

CRISIL has not consolidated Reliance Power Ltd (RPower; 43.2% held by RInfra) because CRISIL believes RInfra will not provide any support beyond the equity capital already invested in RPower.

Similarly, CRISIL has not consolidated Reliance Naval and Engineering Ltd (RNAVAL), no support is currently being provided beyond the equity capital already invested. CRISIL may reassess its analytical approach once the company's operations firm up.

Key Rating Drivers & Detailed Description
* Dominant market position in the power distribution business in Mumbai, ensuring stable regulated returns: RInfra has been the leading power distributor in its licence area of suburban Mumbai, catering to nearly 3 million consumers. Its strong positioning in the service area alongwith regulated tariff structure drive high stability of its cash flows from this business. Company is looking to exit this business hence its future business profile will remain contingent upon its strategies in residual businesses viz. construction and defence.

* Improving revenue visibility in the EPC business: After a decline in captive order books over last few years through fiscal 2017, company has reinstated its focus on external orders. Company expects a healthy order inflow from sectors such as transportation, power, civil and water infrastructure. As on December 20, 2017, it had orders worth around Rs 11,000 crore. A sustained build-up of the order pipeline will strengthen the revenue visibility for this business segment, and will remain a key monitorable over the medium term.

* High exposure to group companies: RInfra has significant exposure to group companies, via inter-corporate deposits and preference shares. CRISIL believes that large investments in group companies may affect the quality of liquidity, and weaken RInfra's financial risk profile.

* Financial risk profile, constrained by high debt-to-EBITDA and below-average debt protection metrics: With a delay in deleveraging plans, the debt-to-EBITDA ratio (including regulated income as part of EBITDA) has remained high at around 6.5 times during fiscal 2017, while the adjusted interest coverage was around 1.85 times. Interest coverage may remain below 2 times during fiscal 2018. CRISIL expects the company to reduce its debt levels over the medium term, however, debt protection metrics may continue to remain constrained till actual debt reduction takes place. Hence timely completion of its deleveraging plans will remain a key monitorable.
About the Company

RInfra is one of the main companies of the Reliance Anil Dhirubhai Ambani group, which includes Reliance Communications Ltd, Reliance Capital Ltd, and RPower. Promoters held 48.36% stake in RInfra as on March 31, 2017.

The company mainly undertakes distribution of electricity in its licence area of suburban Mumbai. The EPC division carries out infrastructure projects, and external projects for RPower. Power generating assets of 941 megawatt (MW), include Dahanu power station (500 MW; supplies to Mumbai), Samalkot power station (220 MW), and Goa power station (48 MW). RInfra also serves as the holding company for its portfolio of infrastructure projects, and held 43.2% in RPower as on March 31, 2017.

In January 2016, RInfra acquired management control by acquiring a 29.9% stake in Pipavav Defence and Offshore Engineering Company, which has been renamed Reliance Defence and Engineering Ltd, and later as Reliance Naval and Engineering Limited (RNAVAL).

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs crore 9846 10352
Profit After Tax (PAT) Rs crore 488 -365
PAT Margin % 5.1 -3.6
Adjusted Debt/Adjusted Networth Times 0.83 1.12
Interest Coverage Times 1.85 1.69
Note:The above reflect standalone CRISIL adjusted financials.

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  Crore) Rating Assigned  with Outlook
INE036A07039 Bond 19-Aug-03 6.7% 19-Aug-18 125 CRISIL BBB+/Watch Developing
INE036A07104 Debentures 27-Jan-12 10.50% 27-Jul-18 585 CRISIL BBB+/Watch Developing
INE036A07112 Debentures 27-Jan-12 10.25% 27-Jan-18 16.7 CRISIL BBB+/Watch Developing
INE036A07146 Debentures 30-Mar-12 11.15% 30-Mar-18 124 CRISIL BBB+/Watch Developing
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Bond  LT  125  CRISIL BBB+/Watch
  No Rating Change  26-07-17  CRISIL BBB+/Watch Negative  12-02-16  CRISIL A-/Watch Negative  20-03-15  CRISIL A/Watch Negative  CRISIL A+/Negative 
                    23-01-15  CRISIL A/Negative   
Non Convertible Debentures  LT  725.7  CRISIL BBB+/Watch Developing    No Rating Change  26-07-17  CRISIL BBB+/Watch Negative  12-02-16  CRISIL A-/Watch Negative  20-03-15  CRISIL A/Watch Negative  CRISIL A+/Negative 
                    23-01-15  CRISIL A/Negative   
Fund-based Bank Facilities  LT/ST    --    --  26-07-17  Withdrawal  12-02-16  CRISIL A-/Watch Negative  20-03-15  CRISIL A/Watch Negative  CRISIL A+/Negative 
                    23-01-15  CRISIL A/Negative   
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Power Distribution Utilities
Rating criteria for manufaturing and service sector companies

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000

Jyoti Parmar
Media Relations
CRISIL Limited
D: +91 22 3342 1835
B: +91 22 3342 3000

Sachin Gupta
Senior Director - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 3023

Manish Kumar Gupta
Director - CRISIL Ratings
CRISIL Limited
B:+91 124 672 2000

Ashish Agarwal
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 8160
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
For Analytical queries:


Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.

About CRISIL Limited

CRISIL is an agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers.

We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com 


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service your account and to provide you with additional information from CRISIL and other parts of S&P Global Inc. and its subsidiaries (collectively, the “Company) you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit www.crisil.com/privacy. You can view the Company’s Customer Privacy at https://www.spglobal.com/privacy

Last updated: April 2016


This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: http://www.crisil.com/ratings/highlightedpolicy.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL