The nations' largest oil marketing and refining company Indian Oil Corporation (IOC) has hit international bond market to raise up to USD 1.5 billion.The state-run company is looking to raise between USD 750 million and USD 1.5 billion through US-dollar- denominated notes, i-banking sources said Friday.The bonds have been rated Baa2 by Moody's and BBB- by Fitch Ratings.
The tenor of issue is not known immediately.Moody's has also affirmed national energy major's rating, expecting leverage levels to stay within tolerance level despite negative free cash flow on account of high shareholder returns and capital spending, said Vikas Halan, a senior vice president at agency.He pointed out that last month IOC had announced a Rs 12,300-crore share buyback and also increased net borrowings."The ratings also remain constrained by uncertainty around government policy for oil gas sector, especially with respect to fuel pricing and consolidation in sector," Halan said noting forced Re 1-a-litre fuel subsidy on state-run oil refiners announced by government last October when petrol price had crossed Rs 94 a liter.Additionally, IOC is also exposed to event risks as government is looking to consolidate its assets in oil gas sector, report said.However, despite risks, IOC's size and government support in case of any serious risks make agency reaffirm ratings, he said, adding rating also draws from sovereign rating.Rival agency Fitch also said it looks at IOC's status, ownership and control by sovereign as 's trong'."We view support track record and likelihood of state support, if needed, for IOC as 's trong'.
The company has received tangible support from state in form of subsidies to meet under-recoveries," it said.Fitch said it expects IOC's capex to remain high to upgrade refineries to meet new emission standards (BS-VI) and to expand refining and petrochemical capacity, including expansions underway.It forecasts an average capex of Rs 25,000-30,000 crore per annum over next five-six years, and noted that these investments will support improvement in margins over medium term."We expect IOC's net debt levels to increase due to large capex plans in medium-term.
However, we believe its credit metrics will remain commensurate with its current standalone credit profile," Fitch said.