Ind-Ra assigns HPCL's NCDs AAA with a stable outlook
Jul 22, 2020
Mumbai (Maharashtra) [India], July 22 : India Ratings and Research (Ind-Ra) has assigned AAA rating to Hindustan Petroleum Corporation Ltd's (HPCL's) Rs 7,500 crore non-convertible debentures (NCDs) due to the company's strategic importance in supporting fuel retailing and marketing operations.
The ratings continue to reflect HPCL's strategic importance in the domestic energy sector, its large albeit indirect sovereign ownership and established brand name and position in the domestic oil refining and marketing business, it said.
The ratings factor in HPCL's strong parentage through the majority ownership by Oil and Natural Gas Corporation Ltd and its strategic importance to the government, given the company's role as the government's extended arm for policy implementation, said Ind-Ra.
The importance is reaffirmed by the pricing actions taken by the government of increasing the excise duty on petrol and diesel, which also impacted the marketing margins of oil marketing companies (OMCs).
HPCL operates three refineries which had a combined capacity of 27.1 million tonnes and a sales volume of 39.6 million tonnes in FY20, translating into the oil refining market share of about 10.9 per cent. The company had 16,476 retail outlets and 6,110 liquefied petroleum gas (LPG) distributorships as of March 31.
Fuel retailing in India has largely remained dominated by Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd and HPCL. The recent government move to privatise one of the OMCs could alter the market structure.
Ind-Ra said it will assess the linkages between the government and OMCs post the stake sale of Bharat Petroleum Corporation and any policy-level changes that accompany such sale including subsidy sharing mechanism.
Ind-Ra will also assess if Indian Oil Corporation and HPCL are to remain strategically important to the government to further its policies. In addition, any deterioration in ONGC's credit profile may have a bearing on HPCL.
Also, any change in the ownership of HPCL will lead Ind-Ra to assess the linkages between the government and HPCL.
