Reliance Industries Lays Roadmap To Become Debt-Free In 18 Months
The company aims to be debt-free over the next 18 months by raising funds and selling stake in its various businesses.
Reliance Industries Ltd. aims to be net debt-free over the next 18 months by raising funds and selling stake in its various businesses.
Mukesh Ambani, chairman of India’s second-largest company by market value, said it plans to sell 20 percent stake in its refining and petrochemical business to Saudi Arabian Oil Co., bring in strategic and financial investors in its retail and telecom businesses and to evaluate value unlocking options for real estate and financial investments.
The company’s newly formed joint venture with British energy giant BP Plc. for retailing fuels across India—which will take over Reliance’s auto fuel network in India and its aviation fuel business—will also help the company pare debt. RIL will hold 51 percent stake in the venture and BP will own the remaining 49 percent stake for which it will pay Rs 7,000 crore.
Saudi Aramco will look to buy nearly 20 percent stake in RIL’s refining and petrochemical business for an enterprise value of $75 billion. The exact equity investment to be done by Saudi Aramco isn’t known.
As of June 30, RIL had net debt of Rs 1,56,533 crore.
RIL also plans to bring in financial and strategic investors in two of its consumer businesses—Reliance Retail Ltd. and Reliance Jio Infocomm Ltd. “We have received strong interest from strategic and financial investors in our consumer businesses,” Ambani said today. He said that RIL will induct leading global partners in these businesses in the next few quarters and move towards listing of both these companies within the next five years.
Over the last two years, the retail business’ revenue has grown over threefold, while operating profit has grown five times on the back of increasing store count and cost control. The expansion has added debt to the retail division. The retail division, which was a net cash company two years ago, had a net debt of nearly Rs 13,900 crore as of FY19, according to CLSA.
On the other hand, Reliance Jio’s revenue and operating profit rose over two times and three times led by an increased subscriber base. The telecom operator, as of June, had over 33 crore users on its network, generating an average monthly rental of Rs 122. Total debt on the books of the telecom business as of June, was Rs 75,000 crore.
Both the consumer businesses of RIL are together valued at close to Rs 5,35,000 crore, according to data compiled by BloombergQuint from eight brokerage reports.
Ambani, for the first time, also announced EBITDA growth guidance—15 percent annually over the next five years. However, the growth rate projected is less than half of what it grew in the years ending March 2018 and 2019. The higher growth rate in its operating profit for 2017-18 was because Reliance Jio started charging customers for its services.
On the back of these initiatives, RIL aims to have one of the strongest balance sheets in the world. It also aims to reward shareholders abundantly through higher dividends, periodic bonus issues and other means, and at a more accelerated pace.
