S&P Global Ratings on Monday said that Reliance Industries Ltd’s sizable proceeds from asset monetisation over the past four months should significantly improve its credit quality.

“RIL’s deleveraging could exceed our expectations, given the extent and magnitude of its asset monetisation,” the rating agency said in a statement.

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The asset monetisation was despite operations that are trending weaker than anticipated for the fiscal year ending March 31, 2021.

The oil-to-telecom conglomerate has amassed Rs 2.1 lakh crore in investment proceeds since Facebook announced its investment in its digital unit Jio Platforms Ltd (JPL) in April 2020.

The proceeds include Rs 1.52 lakh crore investments into JPL, a Rs 53,124 crore rights issuance, and Rs 7,600 crore from BP PLC for the fuel retail joint venture.

“The developments suggest that RIL’s adjusted debt could be less than Rs 1 lakh crore by the end of fiscal 2021. This is better than our base case, which already assumes a sharp decline in adjusted debt to Rs 1.7 lakh crore by fiscal 2023, from Rs 2.7 lakh crore in fiscal 2020,” it said.

As a result, S&P believes RIL’s credit quality will improve over the next two to three years, even if the company’s fiscal 2021 earnings are well below forecasts.

“Our sensitivity analysis indicates that RIL’s debt-to-EBITDA ratio will be resilient to earnings volatility, implying material buffer for its current financials,” it said.

RIL’s first-quarter (April-June) earnings were resilient despite weaknesses shown by its peers.

Consolidated EBITDA fell 12 per cent year-on-year to Rs 21,600 crore as the COVID-19 pandemic and lockdowns, both globally and locally, weighed on the company’s oil refining and petrochemicals as well as retail businesses. The digital division was a bright spot, however.

“Although earnings recovery could be slow, we expect RIL’s fundamentals to remain supported by ongoing strength in the digital division and the gradual improvement in its energy segment. We continue to forecast resilient fiscal 2021 results, with EBITDA remaining flat year on year at about Rs 90,000 crore. In our view, RIL’s first-quarter results demonstrate the benefits of having diversified businesses during volatile times,” it said.

Stating that the possibility of sizable acquisitions was a risk to its underlying view on RIL, the rating agency said this was particularly so in the current environment where the company’s financial buffer could see substantial improvement.

“But we believe the management is committed to deleveraging, and the company will likely operate at lower leverage than prior to the deleveraging exercise,” it said.

Meanwhile, even if the company’s credit metrics strengthen further, the ratings would likely remain at ‘BBB+,’ given India’s transfer and convertibility assessment of ‘bbb+.’