Reliance Industries (RIL), India’s largest private company, will be debt-free this year, Chairman Mukesh Ambani told shareholders at the company’s 37th Annual General Meeting here on Friday.
RIL had an outstanding debt of Rs 67,397 crore on March 31 this year and cash and equivalents of Rs 42,393 crore.
“Reliance will be completely debt-free, net of cash balances, within this year,” Ambani said. “All these reflect a robust financial position and a sound balance sheet, which will help the company finance emerging opportunities,” he said.
| OTHER DEBT-FREE COMPANIES | |
| Company | As on |
| Infosys Tech | Mar, 11 |
| NMDC | Mar, 10 |
| Nestle India | Dec, 10 |
| Natl Aluminium | Mar, 10 |
| Oracle Fin Serv | Mar, 10 |
| Engineers India | Mar, 10 |
| Oberoi Realty | Mar, 10 |
| P&G Hygiene | Jun, 10 |
| Pfizer | Nov, 09 |
| As per latest balance sheets available | |
When that happens, RIL will join an elite group of 37 Indian companies in the BSE 500 list which have zero debt, according to their latest balance sheets. These include Infosys, Engineers India, NMDC and Nestle.
However, Ambani’s speech failed to enthuse the stock markets. RIL shares fell 1.65 per cent and closed at Rs 936.15 on the Bombay Stock Exchange. Analysts said RIL’s plan to be debt-free this year could mean it had not planned any major acquisition in the near future.
The stock fell the most in more than two weeks also because of Ambani’s silence on when the company would increase natural gas production.
Gas output from RIL’s KG-D6 field off the east coast has fallen 17 per cent from a peak of about 60 million cubic metres a day last June. This was right after RIL roped in BP as its upstream partner in a “transformational deal” worth close to $20 billion. The drop in output led RIL to post the slowest growth in profit in six quarters in the three months ended March 31.
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But in his speech, Ambani lobbed the ball in the government’s court saying RIL and BP would jointly assess the “technical issues in ramping up production” at the KG-D6 field after getting government approval for their partnership. He expects the approval to come in the next few weeks.
Meanwhile, he emphasised that vigorous efforts were underway to accelerate development of other discoveries, not only in the flagship KG basin, but also in Mahanadi, Cambay and other locations.
Shale is another priority. RIL, after acquisition of three international acreages, is among the top 30 players in terms of shale gas acreage.
With Asia increasingly becoming an automobile hub, RIL is beefing its presence in the value-added chemicals space. The joint venture with Russia's SIBUR to produce butyl rubber for tyres will have an initial capacity of 100,000 tonnes, making it one of the largest producers in the world.
Taking advantage of the growing demand for plastics in India, RIL is also setting up a 1.5-million tonne olefin cracker unit in Jamnagar. Ambani’s power ambitions, however, have taken a backseat. In last year’s AGM, he had announced a high-profile plan to enter the sector by bidding for ultra mega power projects (UMPPs) offered by the central government, each with a capacity of about 4,000 megawatts. Large investments in nuclear and solar energy were also mentioned. This was after the Ambani brothers ended their no-compete agreement. But there was no mention of power on Friday. Senior company officials said rising coal prices and lack of clarity on the UMPP road map made such plans unviable from an investment return perspective.
RIL’s focus in the coming years will be on consumer and broadband businesses. The new retail business, Ambani said, would offer regional, national and international brands to small traders and shop owners. “Retail is a long-gestation business and will be one of our biggest value creators in the years to come,” he said.
The company, with pan-India spectrum for broadband wireless access, said it was in the process of conceptualising the products and services to be offered. “The services will be in the domain of education, healthcare, entertainment, financial services and government-citizen interfaces. Broadband and broadband-enabled digital services are the next big leap forward in the digital transformation of our knowledge economy,” said Ambani.
RIL, as part of its financial services foray, was not contemplating seeking a banking licence, said Ambani.
Interestingly, many see Ambani’s vision to tap global partners to access the best technology for new business ventures as a subtle but clear shift in RIL’s corporate philosophy.