Moody’s Investors Service on Wednesday said Oil India (OIL) transferring 4.9% shareholding in Numaligarh Refinery to the Assam government for Rs 786.4 crore is credit positive for the company, and will improve its liquidity and financial flexibility. The proceeds from the stake sale have been used to partially repay the short-term debt taken to acquire additional stake of the refinery in March 2021, the agency noted.
The company, in March, had acquired 54.2% stake in Numaligarh Refinery from Bharat Petroleum Corporation (BPCL) for Rs 8,676 crore. Of this, around a 10.5% stake — worth around Rs 1,690 crore — was acquired on behalf of the Assam government with an understanding that the state would repurchase these shares in the ongoing fiscal. Including the current sale, OIL has already transferred around 8.01% stake in the refinery to the state government, and Moody’s expects the company to divest the balance stake over the next few months for Rs 400 crore.
The rating agency, in March, had downgraded OIL’s baseline credit assessment to ‘Ba1’ from ‘Baa3’, expecting that borrowings to fund the acquisition of the Numaligarh stake would put additional pressure the company’s credit metrics. Moody’s had, however, affirmed the company’s ‘Baa3’ issuer ratings and senior unsecured bond ratings. The refinery stake sale was part of the BPCL disinvestment plan.
OIL’s credit metrics were already ailing because of low oil and gas prices throughout 2020. As of March 31, the company had Rs 4,300-crore debt maturing over the next 12 months, of which it has already repaid Rs 3,170 crore so far.
The sale proceeds of Rs 1,300 crore received from stake sales in the refinery to the state government was used for the debt repayment, Moody’s noted.