As Mukesh Ambani-led Reliance Industries plans to cut its net debt to zero by March 2021, rights issue of Rs 53,125 crore, Facebook's investment of Rs 43,574 crore along with BP Plc's investment of Rs 7,000 crore in fuel retailing joint venture will help the company in achieving its target.
The company has a net debt of Rs 1,61,035 crore, which increased by Rs 8,000 crore in the last financial year. The company will be able to become net debt-free in this calendar year, said V Srikanth, joint chief financial officer, RIL.
At the last annual general meeting (AGM) chairman Mukesh Ambani had initiated the target to turn RIL into a net debt-free company by March 2021. The outstanding debt of the company stood at Rs 3.36 lakh crore in March 2020, while cash and cash equivalents at Rs 1.75 lakh crore. The standalone balance sheet has a debt of Rs 2.62 lakh crore, while Jio and Reliance Retail have debts of Rs 23,000 crore and Rs 4,600 crore, respectively, on their books of account.
During the fourth quarter ended March 31, 2020, the capital expenditure stood at Rs 21,707 crore, which includes exchange rate difference. Finance cost rose by 23.9 per cent to Rs 6,064 crore in Q4FY20 as against Rs 4,894 crore in Q4FY19, due to higher loan balances, currency depreciation and lower interest capitalisation on account of commissioning of digital projects.
The proposed Rights Issuance, the first by RIL in three decades, will commence on May 22. The equity shareholders of RIL will be eligible to subscribe one share against the 15 shares held by them. The price for the Rights issue has been determined at Rs 1,257 compared to share price of Rs 1,464 on Friday. "As new strategic investors look to partner and add-value to these growth engines, the rights issue enables all shareholders to participate in the growth of retail and technology business," said Chief Financial Officer Alok Agarwal. The Ambani family will subscribe to their aggregate entitlement in full, besides buying the unsubscribed portion.
RIL said its due diligence with Saudi Aramco is on track and it plans to approach the National Company Law Tribunal (NCLT) to carve out oil to chemicals (O2C) business, in which Saudi oil giant will take 20 per cent stake . With the Aramco deal, the company will become a net cash surplus company. The board has approved a Scheme of Arrangement for transfer of O2C business to Reliance O2C Limited. The new company will comprise of refining, petrochemicals, fuel retail and aviation businesses. "The due-diligence with Saudi Aramco for the planned investment in the O2C business is on track," Srikanth said.
RIL has also received strong interest for its Jio business from other strategic and financial investors. It said that a similar-sized investment of around Rs 43,000 crore, which it is going to receive from Facebook, will come in the Jio Platforms in the coming months.
The collapse in the oil price amid the coronavirus outbreak has severely impacted RIL's inventory valuation. In wake of this, the company has provided for non-cash inventory holding losses of Rs 4,245 crore for the March quarter. Excluding the inventory holding losses, the consolidated net profit increased by 11.3 per cent to Rs 44,324 crore in 2019-20 as against Rs 39,837 crore in the previous year. The net profit was flat at Rs 39,880 crore including the inventory losses. The revenue has increased by 5.4 per cent to Rs 6,59,205 crore. The earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 10.4 per cent to Rs 102,280 crore. The company recommended a dividend of Rs 6.50 per equity share.