Reliance Infrastructure achieves three notch credit rating boost post debt reduction

Reliance Infrastructure, led by Anil Ambani, has experienced a significant uplift in its credit rating, reflecting a fundamental shift in its financial health. India Ratings and Research has upgraded the company’s rating from ‘IND D’ to ‘IND B/Stable/IND A4’, marking a pivotal change following extensive efforts in debt reduction. This marks a crucial turnaround for the company, which had been rated at the default level for six years.

The new rating, which applies to Reliance Infrastructure’s non-fund-based working capital limits of Rs 1,860.23 crore, showcases the company’s successful financial restructuring. The rating agency also withdrew assessments on some proposed fund-based limits that were not utilised, underscoring a streamlined financial approach.

The company had issued Rs 3,010 crore worth of warrants in October 2024, with plans to further raise capital through foreign currency convertible bonds and equity placements.

Reliance Infrastructure’s credit profile has strengthened considerably due to its deleveraging efforts, which resulted in a net-zero debt position with banks and financial institutions. By cutting its standalone debt to Rs 470 crore by March 2025, from over Rs 3,060 crore a year prior, the firm has improved its financial stability. This deleveraging was facilitated by long-term capital infusion, including the issuance of warrants that eased liquidity pressures.

The company’s timely servicing of standalone debt obligations for three consecutive months up to June 2025 further contributed to the positive rating outcome. By executing one-time settlement agreements with the lenders of its subsidiaries, Reliance Infrastructure resolved guaranteed debt issues, reinforcing its financial resilience. These efforts have not only improved the company’s credit standing but also enhanced its operational framework, providing a robust foundation for future growth.

Despite these advancements, India Ratings highlights ongoing challenges, including a weak financial risk profile and exposure to arbitration proceedings and contingent liabilities. These factors remain key areas for monitoring as they could impact future financial stability. However, the company’s strategic focus on addressing these risks is evident in its proactive measures, which aim to mitigate potential setbacks.

Support for the upgraded rating stems from Reliance Infrastructure’s substantial deleveraging of its balance sheet and improved revenue visibility, particularly in the engineering and construction (E&C) segment. The company’s longstanding presence in the infrastructure sector, combined with management’s focus on new-age business order flows, positions the E&C business for a potential turnaround in FY26.

Reliance Infrastructure’s strategic focus on deleveraging and addressing financial risks, while capitalising on its operational strengths, underpins its improved credit standing. It holds a 24.9% stake in Reliance Power and operates across sectors such as roads, metro rail, defence, and engineering services, contributing to its diversified portfolio.