Our Bureau

Mumbai, June 10

STANDARD & Poor's Rating Services on Friday said a potential settlement of the differences between the Chairman and Vice-Chairman of Reliance Industries Ltd (RIL), as reported in the media, is by itself not expected to have any immediate impact on the company's ratings.

"If the settlement entails a carve-out and transfer of the group's telecommunications business, along with the power and energy business, to the Vice-Chairman, as reported by the media, then this is not expected to harm RIL's business and financial profiles, and may even have a positive bearing on RIL.

"However, RIL's business and financial profiles could weaken materially if the settlement involves substantial cash payments by RIL, resulting in increased financial leverage, or a transfer of any of its core oil refining and petrochemicals business," an official statement said.

According to it, RIL reported revenues of $16.7 billion and net profit of $1.7 billion in fiscal 2005, up 30 per cent and 47 per cent respectively, over the previous year, reflecting its superior business position in the refining and petrochemicals segments.

Its debt servicing ability is adequate; EBITDA interest coverage is estimated at 6x, while its debt to capitalisation is below 40 per cent for fiscal 2005.

S&P believes that RIL's liquidity has improved from the previous year with cash and liquid investments for fiscal 2005 adequately covering debt falling due over the next one year. Going forward, RIL is expected to maintain adequate liquidity although a part of these liquid resources is likely to be deployed for the company's planned capital expenditure.

"The outlook on the rating is stable, signifying that the rating on RIL is unlikely to change, with the exception of material adverse developments in the settlements between the Chairman and the Vice-Chairman," the statement said.

S&P also expects that the final settlement would balance the interests of all involved parties, including the lenders and the shareholders, given RIL's prominent positioning in the country's corporate sector and its linkages with the domestic and international banking system and capital markets.

(This article was published in the Business Line print edition dated June 11, 2005)
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