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Wednesday, May 22, 2002

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Fitch India affirms Ind AAA rating of Reliance

Our Bureau

MUMBAI, May 21

FITCH ratings India has affirmed the Ind AAA debt rating of Reliance Industries Ltd (RIL) following the announcement of the sale of 26 per cent equity stake in Indian Petrochemicals Corporation Ltd (IPCL) to RIL by the Union Government.

RIL is also required to make an open offer for acquiring a further 20 per cent equity stake in IPCL. The total transaction for acquiring 46 per cent controlling stake is expected to result in cash outflow of Rs 2640 crore for RIL.

The Ind AAA rating indicates highest credit quality. The risk factors are negligible.

Fitch Ratings had earlier affirmed the Ind AAA rating of RIL following the announcement of the merger of Reliance Petroleum Ltd (RPL) with RIL at a share swap of 11:1.

According to Fitch, the acquisition cost of Rs 2640 crore is about 0.1x the networth of and 0.3x the EBDIT of RIL (including RPL), and can therefore be funded comfortably by the existing operations of RIL.

It added, the IPCL acquisition will increase RIL's share in the Indian polymer market including the polyethylene segment, and will consolidate its position as the market leader. Optimisation of distribution logistics of finished goods could help RIL rationalise marketing costs and improve margins.

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