Reuters: Financial Services and Real Estate: TEXT-Fitch affirms Hindustan Petroleum at 'Fitch AAA(ind)'/stable

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TEXT-Fitch affirms Hindustan Petroleum at 'Fitch AAA(ind)'/stable Apr 30th 2012, 07:53 Mon Apr 30, 2012 3:53am EDT (The following statement was released by the rating agency) Apr 30 - Fitch Ratings has affirmed India-based Hindustan Petroleum Corporation Limited's (HPCL) National Long-Term rating at 'Fitch AAA(ind)'. The Outlook is Stable. The agency has also affirmed HPCL's two non-convertible debentures of INR10bn each at 'Fitch AAA(ind)'. Fitch equates HPCL's ratings to those of the government of India (GoI, 'BBB-'/Stable) to reflect the latter's majority (51.11%) ownership and the company's strong linkages with, and strategic importance to, the state. The ratings also reflect HPCL's position as one of the three public sector oil refining and marketing companies in India and the dominant position occupied by public sector companies (PSCs) in the national oil industry. The agency expects the state to continue to provide support to HPCL, given its role as the government's extended arm for policy implementation. GoI's policy has been to set tariffs for some refined oil products at levels lower than market prices, leading to under-recoveries. However, GoI has ensured that downstream PSCs' net annual under-recoveries are kept under control through financial support and direction to upstream PSCs to supply feedstock at a discount. The government compensates downstream PSCs through direct budgetary support. The agency also notes that HPCL has easy access to external financing, which would provide a liquidity cushion, if required. The ratings may be negatively affected if HPCL's linkages with the GoI are deemed by Fitch to have weakened. HPCL operates two refineries, one each in Mumbai and Vishakapatnam with a capacity of 5.5mmtpa and 8.3mmtpa, respectively. HPCL holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited which has a capacity of 9mmtpa. In March 2012, HPCL commissioned its JV refinery of 9mmtpa refinery in Punjab. For 9MFY12, revenue was INR1.26trn and operating loss was INR12.9bn. Link this Share this Digg this Email Reprints

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