S&P Upgrades Reliance to 'A-': How Consumer Boom Drives Cash Flow Stability

The agency has also assigned a Stable Outlook. In addition, S&P raised the long-term issue ratings on the senior unsecured debt issued by the company to 'A-' from 'BBB+'.

According to S&P Global Ratings, Reliance Industries will continue to increase cash flow from its less cyclical consumer-facing verticals, which will lead to stronger earnings quality.

It stated "We raised our long-term issuer credit rating on Reliance Industries to 'A-' from 'BBB+'....... Reliance Industries Ltd. will continue to increase cash flow from less cyclical consumer-facing businesses, which will improve its earnings quality".

The rating agency highlighted that the company's competitive position across its diverse businesses will further support earnings and cash flow generation, enabling it to sufficiently cover heavy investments across key segments.

"The stable rating outlook reflects our view that the India-based conglomerate will maintain its leading market position in its key businesses, and its earnings will be sufficient to cover capital spending over the next 12-24 months," the rating agency added.

S&P stated that the company's ongoing expansion in more stable consumer businesses, including digital services and retail, is expected to enhance earnings and cash flow stability. Rising earnings from the digital services segment are likely to lower the group's dependence on the more volatile hydrocarbon business.

The agency forecasts that the digital services and retail businesses together will contribute nearly 60 per cent of operating cash flow in fiscal 2026 (year ending March 31, 2026), with the oil-to-chemicals (O2C) and oil and gas segments accounting for the remaining 40 per cent.

It further highlighted that Reliance Industries' strong position in India's telecom sector will continue to power profitability over the next two years.

The agency stated that the company's wireless subscribers could rise between 3-6 per cent over the next 12-24 months, supported by customer churn from other telecom players facing subscriber losses due to constrained network investments.

Meanwhile, ARPU (average revenue per user) for Reliance Jio could increase as more customers upgrade to higher-priced plans and data consumption continues to rise in India. Notably, the company has led industry-wide tariff hikes in India twice in the past.

S&P Global Ratings also stated that earnings growth may outpace high capital expenditure (capex) over the next 12-24 months. Its base case assumes the group will maintain an adjusted debt to EBITDA ratio of 1.5x-1.6x through fiscal 2027, marginally lower than 1.7x recorded in the past two years.

Capex could remain at about Rs 1.4 trillion through fiscal 2027, compared to peak cash capex outflows of Rs 1.5 trillion in fiscal 2024.

The agency expects continued positive free operating cash flow, supported by O2C expansion, the ongoing deployment and expansion of its 5G network, and the further rollout of retail stores.

S&P emphasised that its rating on Reliance Industries continues to be two notches above the sovereign rating on India, citing the company's strong balance sheet and significant exposure to U.S. dollar revenue from its energy-related businesses.

These factors strengthen the group's capacity to withstand liquidity stress in a hypothetical scenario of sovereign stress.

Looking ahead, S&P said the stable outlook reflects expectations that Reliance Industries will maintain its strong market leadership.

- ANI