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Fitch affirms RIL ratings with stable outlook

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Global rating agency Fitch today affirmed Reliance Industries' long-term foreign-currency rating at BBB-, with a stable outlook.

RIL's rating is supported by its strong business profile, which is driven by its robust refining and petrochemical operations, the agency said in a note.

Its primary analyst and a director Muralidharan R cited the robust and improved refining operations that consistently outperform regional refining benchmarks as one of the reasons for retaining the rating with stable outlook.

The company runs the world's largest single-location refinery at Jamnagar with a daily capacity of around 1.24 million barrels.

Reliance Industries (RIL) also benefits from its dominant market position in the petrochemical business, driven by its integrated business model with minimal presence in upstream. RIL recently completed a massive capex that upped the downstream integration, improving its business profile.

RIL's GRM (gross refining margin) improved to USD 11.6 a barrel in FY18, from USD 11 a barrel in FY17, in line with strong industry-wide margins, Muralidharan said in the note.

"While we expect industry-wide refining margins to moderate, we expect RIL's GRMs to remain strong, supported by benefits of its capex. It completed the first phase of a gasification project in H2 of FY18, with the balance scheduled for completion in the H1 of FY19," he said.

But the rating agency noted that its digital services business, Jio, is still small and evolving, and faces intense competition from incumbents. RIL has pumped in around Rs 2.2 trillion till March 2018 into Jio, and "we expect it to make further investments based on the actual growth and performance," it added.

Since Jio has turned profitable in the first year of operations to the year to march 2018, "we expect it to continue to register strong growth and its business to evolve over the medium-term.

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