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Paragraph 1: Citing a likely negative free cash flow situation due to heavy debt repayments over the next 18 months, global ratings agency Moody’s has lowered the credit outlook on Reliance Industries to ‘stable’ from ‘positive’ but retained the Baa2 ratings its long-term debt. The country’s richest and most profitable company will see large cash outflow over the next 18 months towards paying back its creditors for the billions of dollars of capex it had incurred on telecom business as well refining and petrochemical expansions in the past few years.
 
Paragraph 2: This will lead the energy and telecom conglomerate, which already is the largest forex borrower in the country, to tap the debt market more as a result of which it will not be able to reduce its debt and also its free cash flow to be in the negative territory for next 18 months or so, it warned.
 
Paragraph 3: However, it noted that though the refining and petrochem capex is almost complete, the cash outflow will still remain high as payments to creditors for the past capex are made over the next 12-18 months. For the quarter to September, RIL, which has a ? 6 trillion market capitalisation, saw its cash pile falling to ? 77,014 crore at the same time its debt swelled to ? 2,14,145 crore from ? 1,96,601 crore.
 
Paragraph 4: “Such payments along with additional capex towards telecom will constrain any reduction in net borrowings until fiscal 2019,” Moody’s warned in a weekend note.“Accordingly, we’ve revised our outlook on RIL’s long-term issuer rating to stable from positive, but the outlook on its foreign currency senior unsecured rating is maintained at stable. The outlook on Reliance Holding US is also maintained at stable,” Moody’s said.
 
Paragraph 5: The change in the outlook on the Baa2 rating reflects the increase in its business risks due to the growing digital services segment and our expectation that the high capex will keep its free cash-flow negative for at least next 18 months. The company has invested over ? 1.4 trillion into its telecom arm Reliance Jio while it’s at the fag-end of its refining and petrochemical expansion worth over ? 1 trillion.
 
Paragraph 6: The company expects Jio, which reported a ? 260 crore operational profit in the September quarter with a ? 271 crore net loss, to turn in first set of profits in the current fiscal itself. The oil-to-telecom conglomerate reported a 12.5 per cent jump in September quarter net after refining margin soared to a nine-year high and mobile telephony venture earned operational profit. The Baa2 rating affirmation reflects our expectation that RIL’s credit metrics will recover over the next 12-18 months and be better positioned for the ratings as it continues to increase its earnings from the recently completed and ongoing projects in the refining and petrochemical segments.
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  • 1.
    Choose the word/group of words which is the MOST OPPOSITE in meaning to the word/group of words printed in bold in the passage:

    Constrain
    A. Excel B. Confine
    C. Free D. Refine
    E. Covet

  • 2.
    Choose the word/group of words which is the MOST OPPOSITE in meaning to the word/group of words printed in bold in the passage:

    Soared
    A. Rise B. Sail
    C. Descend D. Shoot up
    E. Mount

  • 3.
    Choose the word/group of words which is the MOST SIMILAR in meaning to the word/group of words printed in bold in the passage:

    Outlook
    A. Perspective B. Decision
    C. Rating D. Indifference
    E. Negligence

  • 4.
    Choose the word/group of words which is the MOST SIMILAR in meaning to the word/group of words printed in bold in the passage:

    Conglomerate
    A. Union B. Syndicate
    C. Gang D. Affiliate
    E. Manifold

  • 5.
    As per paragraph 1, what does the ‘stable’ rating mean?

    I. An increase in debt payout and negative cashflow.
    II. A decrease in debt payout and negative cashflow.
    III. An increase in capex and payout of debts.
    A. Only I B. Only II
    C. Only III D. Either I or II
    E. None of the above

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