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Moody's Investors Service Inc.

Moody's Affirms Oil India Limited's Baa3 Rating, Outlook Remains Stable

Strategic Insights

— 2 min read

Moody's Investors Service has affirmed the Baa3 issuer ratings and senior unsecured bond ratings of Oil India Limited (OIL), reflecting the company's strong business profile, underpinned by the competitive cost structure of its upstream and refinery operations. The stable outlook on OIL's ratings reflects the company's expected strong earnings and cash flow generation over the next 12-18 months, driven by the commissioning of additional capacity at its Numaligarh refinery and high capital spending. The affirmation of OIL's ratings also considers its high level of dependence on the government, which provides a one-notch uplift in the ratings.

Key Takeaways:

  • Oil India Limited's Baa3 issuer rating reflects the company's strong business profile, driven by its competitive cost structure and strong profitability.
  • The stable outlook on OIL's ratings is supported by the company's expected strong earnings and cash flow generation over the next 12-18 months, driven by the commissioning of additional capacity at its Numaligarh refinery.
  • OIL's credit metrics are expected to remain appropriately positioned for its current ratings, despite moderate increases in leverage and debt.
  • The company's liquidity is very good, supported by its cash and cash equivalents, expected cash flow from operations, and committed loan facilities.
  • OIL's ratings incorporate a one-notch uplift, reflecting the high likelihood of extraordinary support from the Government of India when needed.
  • The company's dependence on the government is high, given its vital role in India's oil and gas sector and the government's strong influence on its financial and business policies.

Statistics:

  • OIL's EBITDA is expected to reach INR 165 billion in fiscal 2027, up from INR 125 billion in fiscal 2026.
  • The company's annual cash flow from operations is expected to be around INR 90 billion - INR130 billion over the next two years.
  • OIL's consolidated debt is expected to increase to around INR 415 billion by March 2027 from INR 334 billion in March 2025.
  • The company's leverage, as measured by retained cash flow (RCF)/net debt, will remain around 30% by March 2027.
  • OIL's EBIT/interest will be around 7.0x over the same period.
  • The company's liquidity is further supported by its very strong access to banks and capital markets, given its status as a government-owned company.

Sources:

  • Moody's Ratings, "Oil India Limited," July 24, 2024
  • Moody's Ratings, "Integrated Oil and Gas," September 2022
  • Moody's Ratings, "Government-related Issuers," May 2025

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