No impact of stake sale on IOC ratings: Moody’s
Global rating agency Moody’s today said that the Government of India’s sale of its 10% stake in Indian Oil Corporation Ltd (IOC) has no impact on the company’s ratings as government will continue to hold majority stake after divestment.
Moody’s rating on India is Baa3 positive while IOC is also rated at Baa3 positive.
After the stake sale, the government will continue to hold a majority stake of 58.57% in IOC. Oil company’s ratings remain supported by its strategic importance to the country, given its position as India’s largest refiner and distributor of petroleum products.
IOC’s Baa3 issuer rating incorporates its baseline credit assessment (BCA) of ba2, and a two-notch uplift for expected support from the Indian government under Moody’s joint default analysis approach for government-related issuers.
“The government will retain its majority stake in the company after the stake sale, and as such does not affect our assessment of sovereign support for IOC,” says Vikas Halan, a Moody’s Vice President and Senior Credit Officer.
The stake sale in IOC is part of the government’s disinvestment program by which it targets to raise Rs 69,500 billion in the fiscal year ending 31 March 2016 (FY2016).
Agency said it will reassess the level of government support incorporated in IOC’s ratings only if the government’s stake falls below 51%, or if there are other indicators of a change in the relationship between the government and IOC.
However, it sees this as an unlikely scenario, due to strategic importance of IOC as the country’s largest downstream oil company with a 31 share of the domestic refining capacity.
