RIL confident of hitting zero net debt target by Dec

Mukesh Ambani-promoted Reliance Industries (RIL) on Thursday said it was confident of achieving its target of zero net debt in the current calendar year.

This is ahead of the March 2021 deadline Ambani had set in 2019. While the earlier expectation was that RIL’S Aramco deal will help meet this target, a surprise rights issue and divestment in Jio Platforms may do the trick instead.

On Thursday, RIL did not give a timeline for the Aramco deal. But it said it was in good shape to announce a Facebook (FB) investment size deal in the coming months (for Jio Platforms).

“With the rights Issue, the FB deal and, most likely, another strategic investment in Jio Platforms, dependence on the Aramco deal is now considerably lower as far debt reduction goes,” said Nitin Tiwari, vice-president,

Antique Stock Broking.

Last week RIL announced Facebook would invest ~43,574 crore in Jio Platforms for a 9.99 per cent stake in this whollyowned subsidiary.

This week, RIL said it would raise ~53,125 crore through a rights issue. On Thursday, the management indicated another stake sale in Jio Platforms of the same size.

In its statement, the man

agement said it expected to raise ~1.04 trillion by June this year. The ~1.04 trillion includes proceeds from the rights issue, the FB investment, and the previously announced investment from BP in its retail business for ~7,000 crore.

In August last year, group Chairman and Managing Director Mukesh Ambani told shareholders that RIL would be a zero net debt company

before March 2021

As of March 2020, RIL’S gross debt was ~3.36, trillion, and after deducting the cash and cash equivalents, net debt stood at ~1.61 trillion. Both debt figures have risen over the same period last year. With ~1.04 trillion cash proceeds likely by June, RIL will be short of another ~56,000 crore to meet the net debt target at the current level.

In August, RIL announced it looked to sell 20 per cent in its oil-to-chemicals (O2C) division to Saudi Aramco for around $15 billion.

The two companies are yet to sign a definite agreement, leaving scope for changes in valuation, analysts say.

Tiwari said: “The deal with Saudi Aramco is on track, with due diligence going on. While we don’t have a reason, as of now, to believe otherwise, nevertheless these are rather unprecedented times for crude oil and petroleum markets, so valuations of the deal initially frozen could be rescrutinised, considering oil’s new dynamics.” The analyst also pointed out the cash flow from the transaction could be staggered over time, as Saudi Aramco’s cash flow could also be under pressure. On Friday, RIL also informed the exchanges the board had approved an arrangement between the company and its shareholders and creditors and Reliance O2C and its shareholders and creditors. The scheme allows for transferring the O2C undertaking to Reliance O2C as a going concern on a slump sale basis for a lump sum consideration.

The O2C undertaking of the company comprises the oil-tochemicals business consisting of refining, petrochemicals, fuel retail, and aviation fuel (majority interest only) and the bulk wholesale marketing businesses, together with its assets and liabilities.