Mumbai: Standard & Poor's Ratings Services today assigned its BBB / Stable rating to Reliance Industries Ltd.'s proposed $150 million equivalent 10-year notes.

The Indian company plans to use these proceeds to fund its capital expenditure in the refining and petrochemicals sector. These bonds represent an unsecured pari passu obligation of the company.

Reliance is India's largest private-sector company. Its two main lines of business are oil refining and petrochemicals production. For the nine months ended December 31, 2005, Reliance reported revenues of Rs626.7 billion ($13.9 billion) and net profit of Rs6.5 billion.

"The rating on Reliance reflects its globally competitive position in refining and petrochemicals, its divestment of capital-intensive noncore telecom and power businesses, and its overall moderate financial profile," said Standard & Poor's credit analyst Anshukant Taneja.

"The rating, however, remains constrained by Reliance's exposure to highly cyclical industries, large capital commitments in its refining, exploration, and production businesses, and uncertainties in developing its reportedly large gas reserves."

Reliance plans to spend Rs617 billion on capital expenditure over the next three to four years. Standard & Poor's views this plan with some concern, given potential softening in the petrochemical cycle, reduced demand for refined petroleum products, and uncertainties related to the company's upstream gas business. Lower-than-expected cash flows for funding a part of the capital expenditure could mean still higher borrowings, which would weaken the company's credit protection measures.

Nevertheless, the company's current financial position, strong liquidity, and access to financial resources mitigate some of these risks.

The outlook on the rating is stable. A strengthening of credit protection measures, accompanied by timely completion of projects and continued stability in its business risk profile, could result in an improvement in the outlook or the rating.

"However, a sharp downturn in commodity cycles, decline in cash flow protection measures due to increased dependence on external debt for capital expenditure or acquisitions or increased exposure to noncore capital-intensive projects would weigh on ratings," said Taneja.