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Moody’s lowers Oil India’s credit rating on acquisitions - Mr Halan

Gasoil News - Published on Fri, 29 Dec 2017

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ET reported that Moody's Investors Service has lowered government-owned oil explorer Oil India's Baseline Credit Assessment (BCA) saying increased acquisition and shareholder payments have weakened the company's credit profile. Mr Vikas Halan, a Moody's Vice President and Senior Credit Officer, said that "The lowering of the BCA to baa3 from baa2 is driven by our expectation that the company's credit metrics, which have weakened on the back of acquisition and shareholder payments, are unlikely to recover to a level more appropriate for a baa2 BCA."

Oil India acquired stakes in oil and gas fields in Russia for USD 1 billion in 2016 and also executed share buybacks of INR 1,527 crore in June 2017. According to a Moody's report, these exercises resulted in an increase in Oil India's net borrowings to over Rs 8,000 crore as of September 2017 compared to a net cash position in March 2016.

Moody's expects Oil India's borrowings to remain high over the next two-three years unless the company decides to monetize its non-core investments such as its stake in Indian Oil Corporation (IOC) worth INR 10,000 crore as of 26 December 2017.

The investor service firm also affirmed the Baa2 issuer ratings and unsecured bond ratings of OIL.

Mr Halan said "The affirmation of OIL's Baa2 issuer rating reflects our expectation of the high likelihood of extraordinary support that results in a one-notch uplift from its baa3 BCA."

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Posted By : Rabi Wangkhem on Fri, 29 Dec 2017
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