Upward revision in gas price will boost RIL's profit in FY'15: Fitch

Posted By: Religare
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An upward revision in natural gas pricing is expected to help Mukesh Ambani-led Reliance Industries Ltd (RIL) in improving its profitability for the fiscal 2014-15, and will also enable the energy major to increase investment for production boost, Fitch Ratings said.

While affirming RIL's Long-Term Foreign Currency Issuer Default Rating at [BBB-] and Long-Term Local Currency Issuer Default Rating at [BBB], the ratings agency said that the outlook on the foreign currency issues default rating (IDR) is stable and for local currency IDR is positive.

Fitch added that the flagging KG-D6 fields contribute nearly 40 per cent of the company's revenue from oil & gas exploration and production activities in the financial year 2013-13. In case the natural gas pricing is increased, it will result in significant improvement of profitability for the company.

"This re-pricing has met resistance from the user industries largely power and fertiliser as well as from the finance ministry. If upwardly revised, RIL's E&P revenues and profitability are expected to be significantly higher from FY15, when the price revision is due," the agency stated.

The government is considering raising natural gas prices from current USD 4.2 per million British thermal unit to USD 8-8.5 per mmBtu.

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