Share buyback will not affect RIL rating: Fitch

Mumbai: Fitch Ratings, the international rating agency, said today that the proposed share buyback programme of RIL will not have any impact on the company's AAA (ind) / 'stable' rating. The outflow on account of the buyback is capped at Rs30 billion and constitutes less than 10 per cent of the company's net worth on 31st March 2004. Fitch expects the financial profile of the company to remain consistent with the rating assigned, consequent to implementation of the buyback programme, as announced.

Fitch has also taken note of the recent developments on RIL's ownership and believes these are unlikely to affect the company's operations immediately. Nevertheless, they are a distraction for RIL's management and therefore an early resolution of the emerging issues is desirable. Fitch will continue to monitor the developments.

RIL has historically maintained a conservative capital structure with a Debt / equity of 0.62 and Debt / EBITDA of 1.9 in FY04. RIL's net turnover and net profits in FY04 increased 13 per cent to Rs518 billion and 26 per cent to Rs51.6 billion respectively. In the half year ended September 2004, RIL reported a 23 per cent increase in net turnover to Rs336 billion and a 35 per cent increase in net profits to Rs32 billion.

The current upturn in the refining and petrochemical margins resulted in both the businesses showing significantly higher segmental profits. Inspite of higher and volatile crude prices during the period, the petrochemical business showed healthy volume growth. Though RIL has a large capex plan of about Rs350 billion over the next five years, it is likely to be funded primarily with internal accruals.