STANDARD AND POOR’S UPGRADES RELIANCE’S RATING

STANDARD AND POOR’S UPGRADES RELIANCE’S RATING

5-DEC-ENG 8

RAJIV NAYAN AGRAWAL

PATNA-----------------------------Standard & Poor's (S&P Global Ratings) has upgraded Reliance Industries Limited's credit rating from 'BBB+' to 'A-' and maintained a stable outlook. According to the global rating agency, the consistently strong cash flow from consumer-facing businesses, particularly digital services and retail, is making the company's earnings more stable, indicating an improvement in Reliance's earnings quality.

According to the report, by fiscal year 2026, digital and retail businesses will contribute approximately 60 percent to Reliance's total operating cash flow, while the remaining 40 percent will come from oil-to-chemicals and oil and gas. This clearly shows that the company's earnings are shifting away from the volatile hydrocarbon business towards more reliable consumer sectors. Reliance's EBITDA could reach ₹1.95 lakh crore by fiscal year 2026.

According to the rating agency's report, Jio will drive telecom growth and remain a major engine of Reliance's earnings. S&P estimates that Reliance Jio's wireless subscribers could increase by 3 to 6 percent in the next 12 to 24 months. An improvement in ARPU is also expected due to customers upgrading to more expensive plans and increasing data consumption. According to the report, digital services and JioMart could generate approximately ₹80,000 crore in EBITDA in fiscal year 2026, which would be about 43 percent of the company's total earnings.

According to the agency, Reliance's retail business is also contributing to a strong and balanced cash flow. Retail is expected to generate approximately ₹27,000 crore in EBITDA in fiscal year 2026, bringing its share in the company's total earnings to approximately 14 percent. Due to the rapid expansion of new retail stores across the country and a robust supply chain network, this business is now becoming a reliable pillar of Reliance's earnings. According to S&P, despite significant investments, Reliance will maintain its strong market position and continue to generate robust cash flows, ensuring financial stability over the next 12 to 24 months. Annual capital expenditure is expected to remain at around ₹1.4 lakh crore. The report states that Reliance may increase capital investment in its renewable and new energy businesses in the coming years. While these businesses are not currently contributing to earnings, they are expected to become major growth drivers over the next five years. S&P also reiterated that Reliance's rating remains two notches above India's sovereign rating.