“The large investment plans announced by IOC are in line with the agency’s expectations that are incorporated in the assessment of its standalone credit profile of ‘BB+’.
Fitch equalises IOC’s rating with that of its largest shareholder, the state of India, due to their strong operational and strategic linkages,” it said in a statement here.
IOC, on September 15, had said its capex would be Rs 1.7-1.8 lakh crore over the next six years, including around Rs 15,000 crore in the current fiscal and around Rs 25,000 crore each in 2017-18 and 2018-19.
Fitch said it has already factored in most of the capex over the next three years and sees no significant change to its current expectations as a result of this announcement.
“We continue to expect IOC’s free cash flow to remain negative over the medium term due to the high capex,” it said. “However, we still expect IOC’s financial profile to remain stable due to strong volume growth and relatively robust refining margins.”
The rating agency said it expects IOC’s credit metrics to weaken marginally, but to remain within levels commensurate with its stand-alone profile over the medium term.
Fitch said it has not factored in IOC’s investment in the proposed mega refinery project in coastal Maharashtra though.
“We anticipate no major investments associated with this project in the medium term, given the early stages of the proposed project. Fitch will take into account IOC’s investment share in the proposed project once there is more clarity and certainty on time and quantum of the investments,” the statement added.