RIL aims to cut debt in 2018

V. Srikanth  

India’s most indebted firm Reliance Industries Ltd. (RIL), with outstanding loans of ₹2.13 lakh crore, plans to deleverage as it nears the completion of its ₹3 lakh-crore capital expenditure cycle.

“If you look at the way our earnings are shaping up, across hydrocarbons, across Jio, across retail, we will have enough free cash flow,” V. Srikanth, joint CFO, RIL, told The Hindu.

“We are earning a lot and our earnings are going to be way bigger in coming quarters. This quarter is just the beginning, which does not even factor in refinery off-gas cracker’s (ROGC) full capability,” he said.

“We are talking about ROGC full capability in the next quarter and then gasification economics coming in a big way in the next quarter and there will be sequential growth. So, cash flows are going to be much stronger in the next financial year and a positive free cash flow by definition means that your level of debt will only be coming down.”

However, with Moody’s Investors Service estimating that Reliance Jio likely to invest as much as $23 billion over three to four years as it expands beyond wireless services, a significant reduction in RIL’s debt may take longer to achieve.

The company is also set to invest about $4 billion in acquiring telecom assets of Reliance Communications.

Queried about the Moody’s report projecting the $23 billion investment, Mr. Srikanth said, “Moody’s report is a bit of a surprise. My understanding is that they have ticketed $15 billion to $23 billion. The way Moody’s looks at cash flow, if you have to pay suppliers 12 months from now, it’s included. When you look to pay suppliers, that number itself is going to be $12-13 billion. Even if you look at whatever set of numbers we need to continue to grow, we will have enough positive cash flows.”

RIL’s outstanding debt as on December 31, 2017, stood at ₹2,13,206 crore ($33.4 billion) compared with ₹1,96,601 crore as on March 31, 2017. The company had cash and cash equivalents of ₹78,617 crore ($ 12.3 billion) as on December 31 .

‘Rising financing cost’

An increase in debt had led RIL’s finance cost to rise significantly to ₹2,095 crore ($328 million) compared with ₹1,204 crore in the year-earlier period.

RIL attributed the increase in finance cost to lower capitalisation of financial costs related to commencement of digital services business and higher loan balance partially offset by exchange rate variation during the quarter.

The company last week reported a 25% jump in net profit to ₹9,423 crore on revenue of ₹1,09,905 crore.

RIL shares closed flat at ₹964.55 on the BSE on Thursday, valuing the company at ₹6,10,938 crore.

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Printable version | Jan 26, 2021 2:18:41 AM |

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