Standard & Poor's Ratings Services affirmed its 'BBB+' long-term corporate credit rating on India-based energy and petrochemical company Reliance Industries (RIL). The outlook is negative. We also affirmed our 'BBB+' long-term issue rating on the company's senior unsecured notes and loans, and the senior unsecured notes issued by Reliance Holding USA Inc. that Reliance guarantees.

''We affirmed the rating because we believe that Reliance can maintain sufficient financial strength over the next two years even though measures of its cash flow protection are likely to be weaker than we previously expected,'' said Standard & Poor's credit analyst Mehul Sukkawala.

''The commissioning of key projects by the end of fiscal 2016 (ending Mar. 31, 2016) should temper the impact of higher investments in telecom and lower refining and petrochemical margins,'' he added.

''We still view the company's financial risk profile as "intermediate," which incorporates the effects of increased capital expenditure. The debt-to-EBITDA ratio is likely to peak at 2.7x in fiscal 2016, compared with our earlier expectation of 2.0x-2.5x for fiscal 2015. We expect the ratio to improve to significantly below 2.0x by fiscal 2018 when the company commissions a petcoke gasification project and a refinery offgas cracker, and ramps up gas production from an investment in the KG D6 basin,'' said S&P.

''Reliance has increased investments following the acquisition of telecom spectrum in the 1,800 megahertz band for Rs 111 billion. We now expect Reliance to spend about Rs 300 billion on rollout of telecom network over the next two years; the amount is about Rs 100 billion higher than our earlier expectations. Overall, we expect Reliance to spend about Rs 1.5 trillion in capital expenditure over the next three years, mainly in its core business of refinery, petrochemical and oil and gas exploration and production.''

Reliance's 'strong' competitive position reflects the company's large scale, and its integrated and efficient oil refining and petrochemical businesses. The company also has good business diversity, resulting in low volatility in profitability.

We expect Reliance's competitive position to further strengthen following the completion of its investment projects over the next three years. These factors, the company's 'moderately high' country risk, and the risks in the refining and petrochemical industry underpin our 'satisfactory' business risk profile.

We have applied a 'favorable' comparable rating adjustment for Reliance, reflecting the company's favorable business and financial positions compared with other Asian peers. It also reflects our view that the commissioning of key projects should strengthen the company's financial strength and competitive position.

''The negative outlook on Reliance reflects the outlook on the sovereign credit rating on India," said Sukkawala.

''We would lower the rating on Reliance if we downgrade India because the rating on the company can be a maximum of two notches above the sovereign rating.''

''We could lower the rating on Reliance if we lower our transfer and convertibility assessment of 'BBB+' on India (unsolicited rating BBB-/Negative/A-3), which could happen if we downgrade the sovereign. We could also lower the rating if we expect the company's debt-to-EBITDA ratio to remain above 2.5x on a sustained basis. This could happen if: (1) Reliance's capital expenditure is higher than we expected; (2) significant delays or challenges in project commissioning reduce our projection of an increase in the company's cash flows; or (3) the industry significantly weakens, which undermines Reliance's operating performance.''

''We could revise the outlook to stable if the outlook on the sovereign credit rating is revised to stable.''

Shares of the company declined Rs 3.80, or 0.47%, to trade at Rs 807.50 at the BSE (11:48 a.m.Monday).