American credit rating agency, Moody’s gave a thumps up to the proposed sale by Reliance Industries Limited (RIL) of a 20 per cent stake in its oil-to-chemicals (O2C) business to Saudi Arabian oil company Aramco.
It will reduce RIL's debt leverage which is a credit positive, Moody's Investors Service said on Wednesday. In addition, RIL had also announced a plan to sell a 49 per cent stake in its fuel marketing business in India to BP plc for $1 billion.
"The stake sales are in line with RIL's commitment to reduce its net debt to zero by March 2021 and reflect its commitment to maintaining a strong financial profile despite significant capital spending over the last five years," said Vikas Halan, Moody's senior vice president.
Moody's estimates that the two transactions together will reduce RIL's net debt by $16 billion dollars and lower its leverage -- as measured by net debt/EBITDA -- by 1.2 times from 3.2 times for the fiscal year ending March 2019.