RIL's surplus inflows may be used as war chest to speed up organic, inorganic opportunities: Report

Reliance Industries Ltd (RIL) has announced multiple transactions over the past several months to reduce overall net debt and off-balance sheet liabilities (InvITs) by a cumulative amount of Rs 2.1 lakh crore, brokerage Kotak Institutional Equities said in a report on Monday.

New Delhi:The current fiscal can be termed as a year of deals for Reliance Industries, with a slew of transactions already announced and a few large ones in the pipeline, a report said adding that the surplus cash inflows may be used as a war chest to accelerate organic and inorganic opportunities amid ongoing adversities.

Reliance Industries Ltd (RIL) has announced multiple transactions over the past several months to reduce overall net debt and off-balance sheet liabilities (InvITs) by a cumulative amount of Rs 2.1 lakh crore, brokerage Kotak Institutional Equities said in a report on Monday.

The transactions include sale of 9.99 per cent stake in the firm's digital unit Jio Platforms (JPL) to Facebook for Rs 43,573.62 crore, sale of 12.37 per cent stake in Jio Platforms to eight global investors for Rs 60,800 crore.

Rights issue of 422.6 million shares to raise Rs 53,124 crore (out of which 25 per cent has already been procured, while the remaining will be sought in two tranches in May and November 2021), sale of Tower InvIT to Brookfield and sale of 49 per cent stake in the fuel retail JV to BP for Rs 70,000 crore.

The investments in Jio Platforms, which comprises the firm's telecoms arm Reliance Jio Infocomm and its music and video streaming apps, give the unit an enterprise value of Rs 5.16 lakh crore.

Reliance Jio is India's biggest telecoms firm by subscribers, with more than 388 million users. It has forced out several rivals and driven consolidation in the sector since entering the market in 2016 with free voice services and cut-price data.

"In our view, the surplus cash inflows may be used as a war chest to accelerate organic initiatives or pursue inorganic opportunities amid ongoing adversities, besides repaying debt/liabilities," it said.

The report further said that "the surplus amount may be invested in treasury in interim, while acting as a war chest for the company to look for opportunities amid ongoing adversities, which may complement any of its business segments."

The surplus amount may also be utilized to pursue organic plans such as accelerating rollout of new commerce, Fiber to the home (FTTH) and enterprise businesses or bidding for 5G spectrum.

The firm had a net debt of Rs 1.61 lakh crore.

As disclosed earlier, RIL is working on two other large transactions -- sale of 20 per cent stake in oil-to-chemicals business to Saudi Aramco and monetization of fiber InvIT.

RIL approved a scheme of arrangement to carve out the oil-to-chemicals business in a separate undertaking, subject to statutory approvals, presumably to facilitate the transaction.

"Investors' concerns on delays or valuation renegotiation are not unwarranted given cyclical headwinds; however, strategic significance for downstream access for Aramco has only gone up, in our view, amid recent developments in oil market and tax cuts in India post announcement of this deal and Rupee depreciation (for costs) may help in partly bridging the gap, if any," the report said.

(PTI Report)