RIL becomes Net Debt-free ahead of Target

5 min read
RIL becomes net debt-free almost 9 months ahead of target, March 31, 2020 due to Jio Platforms deals by leading global investors and the successful Rights Issue. Reliance Industries has raised over Rs.1.68 Lakh Cr in just 58 days amidst a Global lockdown due to COVID pandemic, which is even more remarkable.

RIL becomes Net Debt-free Due to Jio Platforms Deals & Rights Issue

Introduction

RIL becomes net debt-free almost 9 months ahead of target, March 31, 2020 due to Jio Platforms deals by leading global investors and the successful Rights Issue. Reliance Industries has raised over Rs.1.68 Lakh Cr in just 58 days amidst a Global lockdown due to COVID pandemic. It is even more remarkable.

Mr. Mukesh Ambani has fulfilled his promise to the shareholders (at the 42th AGM of RIL, August 12, 2019) to become a zero debt company by March 31, 2021, ie within 18 months.

Detailed Stock Analysis by Invest Yadnya
Stock Analysis by Invest Yadnya

RIL becomes Net Debt-free ahead of Target

Lets see how Reliance Industries executed the roadmap successfully to become the net debt-free company 9 months ahead of target, March 31, 2021.

Reliance Industries Ltd - RIL becomes Net Debt-free 9 Months ahead of Target
Reliance Industries Ltd – RIL becomes Net Debt-free ahead of Target
  • Reliance Industries Ltd has raised over Rs.1,68,818 Cr in just
    58 days through :
    1. Investments by global tech investors : Rs.1,15,694 Cr
    2. Rights Issue : Rs.53,124 Cr
  • The combined capital raised has no precedence globally in such a short time.
  • Both of these are also unprecedented in Indian corporate history and have set new benchmarks. This is even more remarkable that this was achieved amidst a global lockdown caused by the COVID-19 pandemic.
  • As on March 31, 2020, RIL’s net debt was Rs.1,61,035 Cr.
  • Thus, with the total raised funding of Rs.1.68 Lakh Cr, RIL has became net debt-free company almost 9 months before the target – March 31, 2021.
1. Investment in Jio Platforms by Leading Global Investors
  • Since April 22, 2020, Jio Platforms has raised Rs.1,15,694 Cr from leading global investors including : Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG, L Catterton and PIF (The Public Investment Fund).
  • The detail regarding amount invested and % stake of these global players is summarized as follows :
Investment in Jio Platforms by Leading Global Investors
RIL becomes Net Debt-free – Investment worth Rs.1,15,694 Cr in Jio Platforms by Leading Global Investors
  • In last 2-months, RIL has diluted total 24.7% stake in Jio Platforms, its 100% subsidiary earlier. Thus, RIL’s current holding in Jio Platforms is 75.3%.
  • PIF’s investment, one of the world’s largest sovereign wealth funds, marks the end of Jio Platforms’ current phase of induction of financial partners.
2. Successful Completion of Rights Issue
  • Reliance Industries has also completed its mega rights issue of Rs.53,124 Cr successfully. The Rights Issue was oversubscribed by nearly 1.59 times.
  • RIL Rights Issue was not only the largest ever in India, but also the largest in the world by a non-financial entity in the last ten years.
  • The offer document for the rights issue said about three quarters of the inflows from rights issue would be used for repaying debt.
    • That would mean, around Rs.39,800 Cr would go towards repayment/ prepayment of borrowings.

Decoding the Valuation of RIL

  • When we consider the individual business-wise valuation of RIL :
    1. Enterprise Value of Jio Platforms : Rs.5.16 Lakh Cr
    2. Base Valuation of Reliance Retail : Around Rs.4.5 Lakh Cr
    3. Valuation of Legacy Petrochemical & Refinery : Around Rs.3.5-4 Lakh Cr
  • Thus, the Total Valuation of Reliance Industries Ltd (RIL) comes out to be at around Rs.13-14 Lakh Cr. However, being a holding company, RIL would be traded at discount to its perceived valuation in future. So, there is very limited upside for RIL valuation.
  • Once Jio and Retail gets listed seperately on the bourses, RIL can’t report the aggressive valuation as that of Jio and Retail.

Reliance Industries Ltd becomes India’s 1st $150 bn Company

  • The Oil-to-Telecom-to-Retail behemoth Reliance Industries Ltd became the first Indian company to be valued at $150 billion.
  • In rupee terms, it also became the first Indian company to be valued at over Rs.11 Lakh Cr. With the current market capitalization of Rs.11.15 Lakh Cr, RIL is India’s most valuable company with a wide margin.
Reliance Industries Ltd - First Indian Company to Cross Rs.11 Lakh Cr Milestone
Reliance Industries Ltd – First Indian Company to Cross Rs.11 Lakh Cr Milestone
  • Reliance Industries is among the most valued Energy companies in the world. Its market cap is more than that of Total SA, Royal Dutch Shell, BP but lower than Exxon Mobil, Chevron. Saudi Aramco is world’s largest and most valued energy company.
  • On June 19, 2020, RIL hits record high at Rs.1,788.80. The stock rallied over 6% and closed at Rs.1,759 per share, an All-time high.
  • Amid the ongoing recovery in the domestic equity market, RIL share price doubled in 59 sessions. The stock rallied to its all-time high of Rs.1,759 from a panic low of Rs.867 (closing Rs.883) on March 23, 2020.
  • Shares of RIL was in the spotlight in Friday’s trade (June 19) after the company announced that it has now become net debt-free.
RIL Share Price Doubled from March Low
RIL becomes Net Debt-free – RIL hits Record High (June 19, 2020) – Share Price Doubled from March Low

Where Does Reliance Industries Ltd (RIL) Stand Globally?

  • Reliance Industries Ltd is the first Indian company to be valued at $150 billion.
  • It is also among the most valued Energy companies in the world. Its market cap is more than that of Total SA, Royal Dutch Shell, BP but lower than Exxon Mobil, Chevron.
  • Reliance Industries is the top-most ranked company from India to
    feature in Fortune’s Global 500 list of ‘World’s Largest Corporations’.
  • Currently RIL is ranking 106th in terms of both revenues and profits.
  • The company stands 71st in the ‘Forbes Global 2000’ rankings for 2019 – top-most among Indian companies.
  • It ranks 10th among LinkedIn’s ‘The Best Companies to Work For In India’ (2019).

Conclusion

  • RIL has built up a dominant presence in refining, petrochemicals, telecom and retail businesses.
  • Reliance Jio and Reliance Retail business will be key growth drivers for the company going forward.
  • In company’s 42th AGM, August 2019, Mr. Mukesh Ambani proposed the listing of the Reliance Jio and Reliance Retail within the next 5 years. RIL’s roadmap towards it is along the expected lines.
  • So, the retail investors should keep some allocation in the portfolio for the Jio and Retail IPO.
  • RIL has reported a big rally since March low, so the upside would be limited hereon.
  • Reliance Industries stock is able to sustain the valuation mainly due to the passive investments via Index funds due to its higher weightage.

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