Moody's upgrades Reliance to Baa1 on strong balance sheet, diversified businesses

New Delhi: Moody's Ratings has upgraded Reliance Industries Ltd to Baa1 from Baa2 - two notches above India's sovereign rating, citing the conglomerate's resilient credit profile, diversified operations and strong financial discipline.

The ratings agency said Reliance benefits from its leading positions across oil-to-chemicals, digital services and retail, as well as counter-cyclical business segments and significant international exposure, with more than one-third of revenue coming from exports.

"RIL's rating has been upgraded to Baa1 from Baa2, reflecting its fundamentally strong and resilient credit profile, supported by its large scale, diversified operations, and leading market positions across oil-to-chemicals, digital, and retail sectors," Moody's said in a statement.

The agency added that Reliance's scale, diversified earnings streams and limited dependence on government-linked revenues support its ability to generate stable earnings through economic cycles.

Moody's also highlighted the company's strong liquidity position, with about $25 billion in cash and modest debt levels, alongside sustained cash-flow generation and strong access to domestic and international capital markets.

Reliance was "among the first Indian corporates to publicly commit to and achieve a net debt zero position, while maintaining conservative financial policies consistent with a higher rating level," the agency said.

The upgrade comes under Moody's revised sovereign-linked ratings methodology, which allows some companies to be rated up to two notches above the sovereign if they demonstrate strong resilience and limited exposure to domestic economic stress.

However, Reliance's rating remains capped at two notches above India's sovereign rating of Baa3 because of its significant exposure to the domestic economy through its fast-growing telecom and retail businesses, Moody's said.

The agency assigned a stable outlook to Reliance, mirroring the outlook on India's sovereign rating and reflecting expectations that earnings growth across most business segments will keep credit metrics strong over the next one to two years.

Moody's said an upgrade would depend on an improvement in India's sovereign rating, while maintaining key metrics including funds from operations-to-net debt above 25 per cent, net debt-to-EBITDA below 2.0 times, and EBITDA-to-interest coverage above 7.0 times.

A downgrade could result from a sharp deterioration in operating performance, aggressive capital spending, large acquisitions or shareholder payouts that materially increase borrowings, the agency said.