Fitch Affirms HPCL-Mittal Energy at BB+, Maintains Stable Outlook

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Fitch Ratings has reaffirmed HPCL-Mittal Energy Limited’s long-term issuer default rating at BB+, reflecting the company’s financial stability and growth potential. The stable outlook indicates confidence in HPCL-Mittal Energy’s ability to sustain its operational performance and manage leverage effectively.

Key Highlights of the Rating Affirmation
- Fitch’s decision follows an upward revision of HPCL-Mittal Energy’s standalone credit profile to bb- from b+
- The company’s EBITDA net leverage is expected to remain below 5.0x from FY25 to FY28, supporting financial resilience
- The rating benefits from a two-notch uplift due to its parent company, Hindustan Petroleum Corporation Limited, which has medium incentives to support HPCL-Mittal Energy
- The stable outlook reflects expectations of improved cash flow stability following the completion of the company’s petrochemical project

Factors Driving the Rating Decision
- HPCL-Mittal Energy’s deleveraging efforts are supported by lower capital expenditure intensity and increased cash flow from its petrochemical operations
- The integration of refining and petrochemical processes is expected to enhance operational efficiency and profitability
- The company’s refining margins are projected to remain healthy, despite moderating from previous highs
- Petrochemical utilization has improved significantly, with plant operations reaching full capacity in March-April 2024

Future Outlook and Industry Implications
- Fitch anticipates HPCL-Mittal Energy’s EBITDA net leverage to decline further, reaching below 4.0x from FY27
- The company’s focus on energy transition projects and maintenance investments will contribute to long-term financial stability
- Analysts expect continued improvements in refining margins and petrochemical spreads, supporting revenue growth

Source : Fitch Ratings, HPCL-Mittal Energy, Economic Times.