Fitch affirms Indian Oil Corp at ‘BBB-’; outlook stable
New Delhi: Credit rating agency Fitch Ratings has affirmed Indian Oil Corp Ltd’s (IOC) long-term foreign-currency issuer default rating (IDR) at ‘BBB-’ with a stable outlook. The agency also maintained the senior unsecured rating and the ratings on the outstanding senior unsecured debt of IOC at ‘BBB-’. “The IDR and outlook are equalised with the largest shareholder, the state of India (BBB-/Stable), under our Government-Related Entities (GRE) Rating Criteria, reflecting a very strong likelihood of state support," Fitch Ratings said.
Fitch considers IOC’s standalone credit profile (SCP) as ‘bb+’. The SCP is underpinned by IOC’s dominant market position in India’s oil and refining industry, the above average complexity of its refining assets compared with peers, its integration into petrochemicals and the industry’s cyclical nature. Fitch assesses IOC’s status, ownership and control by the sovereign as ‘Strong’.
The state directly owns 51.5% of IOC and 28% through other state-owned enterprises (SOEs), and appoints the company’s board. “We view the record of state support for IOC as ‘Strong’. In the past IOC has received tangible state support in the form of subsidies to meet the under-recoveries on products sold below market prices.
It has also received indirect government support for its overseas upstream acquisitions," it added. Fitch expects IOC’s marketing segment to return to profitability in the financial year 2024, as crude oil prices are projected to decline from the record levels seen in FY23. However, the agency anticipates that marketing margins in FY24 may be below normal due to potential retail price reductions in the latter half of the fiscal year.
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