Rating firm Fitch today said it has affirmed its highest rating to state-run Hindustan Petroleum Corporation with a stable outlook on the back of the company's strong position in the domestic market.
"Fitch Ratings has affirmed India-based Hindustan Petroleum Corporation Ltd's (HPCL) national long-term rating at 'AAA(ind)' with stable outlook," it said in a statement.
It further said: "The ratings reflect HPCL's majority ownership by the Government of India, its position as one of the three public sector oil refining and marketing companies in India, the dominant position occupied by public sector companies in the national oil industry, and its strong linkage with and strategic importance to the state."
The 'AAA' denote the highest rating assigned by the agency. It is assigned to issuers or obligations with the lowest expectation of default risk.
Fitch has also affirmed 'AAA(ind)' ratings on two non-convertible debenture programmes of HPCL valued at Rs 1,000 crore each.
The government holds 51.11% stake in HPCL.
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"Fitch expects the state to continue to provide support to HPCL, given its role in implementing the government's energy policy," the ratings agency said.
The government subsidy to oil firms now comes in the form of direct budgetary support rather than by granting oil bonds.
"Fitch believes this change is beneficial to HPCL as the oil bond mechanism led to spikes in borrowing, liquidity stress and a high proportion of short-term debt. Fitch also notes that HPCL has ready access to external financing," it added.
HPCL operates two refineries in Mumbai and Vishakapatnam with a capacity of 5.5 mmtpa and 8.3 mmtpa, respectively. It also holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Ltd.
The state-run firm is also constructing a 9 mmtpa refinery under a joint venture in Punjab.