Reliance Industries' proposed USD 7 billion rights issue, a string of equity deals of USD 8 billion in Jio Platforms, and USD 1 billion from a joint venture with BP plc will allow its leverage to improve, Fitch Ratings said on Wednesday.
"The rights issue and equity deals when completed are likely to support an upgrade of RIL's long-term local-currency issuer default rating (IDR) of 'BBB', which is on a positive outlook," it said in a statement.
RIL's long-term foreign-currency IDR (BBB-/Stable) is constrained by India's country ceiling of 'BBB-', it said.
Fitch said the management of oil-to-telecom conglomerate is committed to achieving a net cash position by end-March 2021, which it could achieve sooner if it receives the required regulatory and other customary approval for the rights issue and equity deals in 2020.
The company announced three equity deals in as many weeks, including USD 5.7 billion investment from Facebook Inc, USD 750 million from Silver Lake Partners and USD 1.5 billion from Vista Equity Partners, in Jio Platforms -- the holding company for its wireless and technology business.
It also got USD 1 billion from selling 49 per cent stake in the auto fuel retailing business to BP plc.
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Also, the firm announced its first rights issue in three decades.
Its billionaire promoter Mukesh Ambani and his family are committed to subscribe to full portion of their share, and also to the unsubscribed portion if any.
"We forecast RIL to generate positive free cash flow in the financial year ending March 2021 (FY21), the first time since FY13, and its net leverage to fall to 1.8x from 2.2x in FY20," Fitch said.
"Lower net leverage would result from higher earnings before interest, taxes, depreciation and amortization (EBITDA) generation from consumer businesses and lower capex intensity, despite the likelihood of coronavirus-related weakness in its refining and petrochemical segment."
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