Page 24 - Plastics News May 2020

Reliance Industries' slew of equity deals to drive ONGC losses on gas business to widen to Rs
improvement in Co rating 6,000 cr in Fy21

NGC is likely to see its loss on natural gas sales
Owiden by nearly 50 per cent to Rs 6,000 crore in
the current fiscal after the government-mandated
rates for the fuel dropped to a decade low. According
to reports, a company communique to the government
Oil and Natural Gas Corp (ONGC) had posted Rs 4,272
crore loss on gas business in 2017-18, which is likely to
widen to over Rs 6,000 crore in the current fiscal (April
2020 to March 2021). However, the accounts for 2019-
20 are yet to be finalised but the loss on gas business
Mukesh Ambani's Reliance Industries announced three should be around Rs 4,500 crore. ONGC has seen
equity deals in as many weeks is to drive its incurring losses on the 65 million standard cubic
improvement. Reliance Industries' proposed USD 7 meters per day of gas it produces from domestic fields
billion rights issue, a string of equity deals of USD 8 shortly after the government in November 2014
billion in Jio Platforms, and USD 1 billion from a joint
introduced a new gas pricing formula that had
venture with BP plc will allow its leverage to improve,
"inherent limitations" as it was based on pricing hubs
according to Fitch Ratings. “The rights issue and equity
of gas surplus countries such as the US, Canada, and
deals when completed are likely to support an upgrade
Russia. Rates according to this formula were revised
of RIL's long-term local-currency issuer default rating
every six months. Prices effective April 1 have been cut
(IDR) of 'BBB', which is on a positive outlook,” it said in
a statement. RIL's long-term foreign-currency IDR to USD 2.39 per million British thermal unit - the
(BBB-/Stable) is constrained by India's country ceiling lowest in more than a decade. ONGC in the
of 'BBB-', it said. Fitch said the management of oil-to- communique stated that the break-even price of
telecom conglomerate is committed to achieving a net major ongoing/planned projects to produce gas from
cash position by end-March 2021, which it could
newer discoveries was in the range of USD 5-9 per
achieve sooner if it receives the required regulatory
mmBtu. In previous years, loss from the gas segment
and other customary approval for the rights issue and
was getting offset from the gain from the oil business.
equity deals in 2020. The company announced three
The company wants gas pricing to be completely freed
equity deals in as many weeks, including USD 5.7 billion
investment from Facebook Inc, USD 750 million from with a floor rate of USD 4.2 per mmBtu (equivalent to
Silver Lake Partners and USD 1.5 billion from Vista rate given in the regulated regime), they added.
Equity Partners, in Jio Platforms -- the holding
company for its wireless and technology business.It
also got USD 1 billion from selling 49 per cent stake in
the auto fuel retailing business to BP plc. Also, the firm
announced its first rights issue in three decades. “We
forecast RIL to generate positive free cash flow in the
financial year ending March 2021 (FY21), the first time
since FY13, and its net leverage to fall to 1.8x from
2.2x in FY20,” Fitch said.

MAY 2020 24 Plastics News