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Reliance Industries Ltd (RIL), led by Mukesh Ambani, is reportedly on the cusp of a potential credit rating upgrade, according to global rating agency S&P Global Ratings. The agency highlighted the company’s expanding footprint in digital services and retail as key drivers for more predictable earnings, which could shield RIL from the volatility of global energy markets. A combination of disciplined leverage management and stronger contributions from non-energy segments could pave the way for a rating uplift over the next 12 months.

S&P Global Ratings highlighted the possibility of a rating upgrade for RIL.

"There is a potential for upside in RIL's rating. It is at 'BBB+'... This (rating going up by a notch) would require the stand-alone credit profile to improve. For this, we need the company to continue operating at lower leverage and strengthen the contribution from non-energy revenues, because these are less volatile," it said.

S&P Global Ratings emphasized that RIL’s move toward domestically focused businesses, particularly digital services and retail, is reshaping the company’s earnings profile.

"We expect the share of earnings from Reliance’s domestic businesses to rise to around 60 percent by the end of fiscal 2026, up from about 45 percent in fiscal 2022. These segments tend to offer more predictable performance than cyclical oil and gas operations," S&P noted in its report.

He added, "A combination of these factors could push the rating up and is something to watch for in the next year or so."

RIL delivered a robust start to fiscal 2026, reporting an EBITDA of ₹58,000 crore for the quarter ended June 30, beating S&P’s expectations. The performance was driven by strong growth in Reliance Jio Infocomm, resilient earnings in the oil-to-chemicals (O2C) segment, and a one-time gain of ₹8,900 crore from selling a minority stake in Asian Paints Ltd.

S&P noted, "Earnings from the O2C segment are expected to remain resilient owing to RIL’s complex processing facilities and strong domestic energy market presence."

While other Asian refining and petrochemical companies faced EBITDA declines of 20-45 percent in fiscal 2025, RIL’s O2C segment saw a decline of just 12 percent. The segment is projected to experience a modest 3-5 percent decline this fiscal year despite global volatility.

Reliance Jio is expected to benefit from higher tariffs and a growing subscriber base. S&P estimated, "The unit’s EBITDA will rise 15-17 percent in fiscal 2026, aided by the full-year impact of a 12.5-27 percent increase in mobile tariffs effective July 3, 2024."

Overall, RIL’s earnings are projected to grow 6-8 percent to ₹1.8 lakh crore in fiscal 2026, with its debt-to-EBITDA ratio seen stable at 1.5x-1.7x.

The report also highlighted RIL’s continued growth initiatives, including investments in its JioStar media business acquired in November 2024 and expansion in renewable energy.

Annual operating cash flows of ₹1.3-1.4 lakh crore are expected to largely fund capital expenditure of about ₹1.4 lakh crore over the next two years. S&P said, "The company has adequate headroom to fund growth aspirations and withstand earnings volatility from its energy segments."

RIL’s leverage has remained low at approximately 0.64x over the past two fiscal years, compared with S&P Global Ratings’ adjusted debt-to-EBITDA ratio of 1.6x-1.8x.

Reliance Industries’ shares have significantly outperformed the benchmark index so far this year. Year-to-date, RIL stock has gained 16.4 percent.

The stock rebounded sharply from its 52-week low of ₹1,115.55 on April 7 to touch a 52-week high of ₹1,551 on July 9. However, the rally lost momentum in July, with shares declining over 7 per cent and ending a four-month winning streak. In August so far, RIL has recovered some ground, climbing more than 2 per cent.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

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