Reliance Communications (RCom), an Anil Ambani-owned company, has been assigned the highest quality rating of a leading credit rating agency for its Rs.30-billion non-convertible debenture (NCD) programme and Rs.100-billion proposed long-term fund-based facilities.
ICRA, an associate of international credit rating agency Moody's Investors Service, awarded it the long-term LAAA rating - the highest-credit quality rating assigned by it, and implies the lowest credit risk for a rated instruments.
ICRA also re-affirmed short-term ratings of A1+ assigned earlier to RCOm's Rs.74.08-billion short-term fund-based as well non-fund based limits and Rs.20-billion commercial paper programme.
A1 is the highest-credit-quality rating assigned by ICRA to short-term debt instruments. Within this category, certain instruments are assigned the rating of A1+ to reflect their relatively stronger credit quality.
ICRA said it had factored in RCom's "established position as a leading and integrated service provider", its "competitive" cost structure and the operational strengths it derives from its pan-India network and growing customer base.
"Moreover, with the recent launch of GSM operations in 14 additional circles, the company is now well positioned to capitalise on the favourable demand potential of the domestic mobile business on the strength of an established pan-India marketing," it said.
The agency also it took into account the company's "significant liquid and cash balances" of around Rs.80 billion and net worth of around Rs.338 billion and the fact that it intends to use a part of the rated fresh long-term borrowings to reduce its existing short-term debt and thereby improve its debt-maturity profile.
However, while assigning the ratings, ICRA noted the significant increase in RCom's debt levels from Rs.174.4 billion March 31, 2007 to Rs.258.2 billion March 31, 2008 and further to Rs.266.7 billion Dec 31, 2008, a significant part of the debt being in foreign currency.
The additional debt has been raised to meet the capital expenditure requirements of various projects, including expansion of the GSM network, it said.