Fitch Ratings has affirmed India-based Reliance Industries (RIL) long-term foreign currency issuer default rating (IDR) at 'BBB-' with a stable outlook. The agency has also affirmed the long-term local currency IDR at 'BBB' and revised the outlook on the rating to Stable from Positive.

RIL's operating and financial performance continues to be very strong, which is captured in the affirmation of the ratings. The change of the outlook on the local currency IDR, which is not constrained by India's Country Ceiling of BBB-, to Stable reflects Fitch's revised expectations on RIL's medium-term credit metrics and the revenue contribution of the upstream oil & gas business. We now believe the company is not likely to meet the levels articulated in Fitch's earlier research in the next two to three years, at which we would take positive rating action.

RIL's ratings are supported by the company's scale, asset quality and position as a leading Indian refiner and a petrochemical producer, with approximately 1.4 million barrels per day (bpd) of throughput capacity; integrated business with upstream as well as downstream petrochemical operations; strong operating cash flows and ample liquidity. The company continues to consistently out-perform the regional refining margin benchmarks. Fitch expects the profitability of the company's refining and mid-stream operations to improve further once the on-going investments to increase capacity and improve efficiencies is completed over the next two to three years.

RIL will likely invest less in its domestic upstream operations given the lower than anticipated increase in gas price. However, the company is now investing a higher than previously guided amount in its Indian telecom operations (over USD 11 billion through FY16). The Indian telecoms sector is highly competitive; we expect RIL's entry to add further pressure on tariffs, especially for data.

Fitch expects that RIL will continue to generate strong operating cash flows of USD 6 billion-8 billion a year. However, the high capex needs will lead to negative free cash flows (FCF) for the next two years and likely to lead to an increase in the net leverage, as measured by adjusted net debt to EBITDA, from 2.0x in FY14. Net leverage, though, is likely to remain well under 3.0x, which is comfortable for the company's ratings. The previous Positive Outlook on RIL's Long-Term Local Currency IDR was also based on the expectation that it would maintain financial leverage at below 1.5x. The company has very strong liquidity with adjusted cash and cash equivalents of Rs 777 billion (USD 12.9 billion). RIL also has very good access to domestic and international capital markets and banks.

Shares of the company declined Rs 28.85, or 2.91%, to trade at Rs 962. The total volume of shares traded was 241,371 at the BSE (2.53 p.m., Monday).