Moody's affirms Indian Oil, cuts base credit

Moody's Investors Service said it affirmed its Baa3 issuer rating on Indian Oil Corp. (IOC) with a stable outlook.

"Whilst IOC's ratings remain unchanged, the company's fundamental credit quality has been weakening as a result of a combination of lower refining margins and rising under-recoveries, which require short-term funding before compensation is received from the government," said Vikas Halan, a Moody's vice president and senior analyst in a news release.

"Accordingly, we have lowered our baseline credit assessment, which reflects IOC's standalone credit quality in the absence of any assumed government support, to Ba2 from Ba1," said Halan, who is also lead analyst for the company at Moody's.

Moody's said it believes that the company's credit metrics will remain weak over the next 12 to 18 months, given the government's reluctance to reduce fuel subsidies as well as an expected weak refining margin environment.

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