Reorganisation of Gasification Assets Credit Neutral For Reliance Industries

India Ratings and Research (Ind-Ra) believes that the recently proposed scheme of arrangement by Reliance Industries Limited (RIL) to transfer its gasification assets into Reliance Syngas Limited (RSL, wholly owned subsidiary of RIL) is credit neutral for the company.

Ind-Ra opines that the linkages between RIL and RSL will remain strong enough to validate the consolidated rating approach even after the implementation of the scheme. Ind-Ra takes a consolidated view of RIL and its subsidiaries, to arrive at RIL's ratings, due to the strong operational and strategic linkages among them.

Ind-Ra rates RIL's debt at 'IND AAA'/Stable.

Salient Features and Rationale of Scheme:

(a) The scheme provides for the transfer of the gasification assets from RIL to RSL as a going concern on a slump sale basis with an appointed date of 31 March 2022. The scheme will require approval of stock exchanges, creditors, shareholders, National Company Law Tribunal and other regulatory authorities.

(b) The reorganisation will help RIL to utilise a higher quantity of syngas towards production of high-value chemicals and hydrogen, and thereby participate in the growing business opportunity.

(c) The scheme would help RIL in reducing its carbon footprint at Jamnagar complex as (a) the company progressively transitions into renewables as its primary source of energy, (b) the carbon dioxide released during the process of producing hydrogen is highly concentrated and easy to capture.

(d) The scheme provides RIL with an opportunity to potentially attract investors and strategic partners in RSL.