RIL debt to shrink on completion of 5G rollout by December

Reliance Industries (RIL), India’s largest company by market valuation, is expected to venture into a debt reduction plan from 2024 as it is nearing completion of its major investment cycle -- 5G network rollout. According to officials, the capital expenditure intensity will decline significantly on completion of the 5G network rollout by the end of this month. The decline in capex will help the company reduce net debt, which stood ₹1,17,727 crore in September. RIL has a gross debt of ₹2,95,687 crore and cash and cash equivalent of ₹1,77,960 crore on books.

The September gross debt is 5.8% lower compared to that in March. The debt is lower with a capital raise of ₹10,347 crore in Reliance Retail Ventures Ltd (RRVL) from Qatar Investment Authority (QIA) and KKR during the quarter. RRVL had also raised ₹4,967 crore from the Abu Dhabi Investment Authority (ADIA) in October. “Strong operating cash flows largely funded capex of ₹38,815 crore primarily towards 5G roll-out and building retail ecosystem,” the company said in a recent presentation.

RIL’s gross debt was ₹3,13,966 crore in FY23, compared to ₹2,66,305 crore in the previous year. The FY23 debt includes standalone gross debt of ₹2,15,823 crore and balance in key subsidiaries, including Reliance Retail (₹46,644 crore), Reliance Jio (₹36,801 crore), Independent Media Trust Group (₹5,815 crore) and Reliance Sibur Elastomers (₹2,144 crore). The debt service coverage ratio improved to 2.03 in FY23 as against 1.19 in the previous year due to improved earnings and lower principal repayments, the company said in the annual report.

In the last financial year, the debt-equity ratio increased to 0.44 from 0.34 in FY22. The ratio was 0.36 in FY21.

The cash and cash equivalent portion stood at ₹1,88,200 crore in FY23 as against ₹2,31,490 crore in the previous year. It was ₹254,019 crore in FY21. RIL says it manages cash and cash equivalents through an investment portfolio, diversified across instruments and counterparties. The investments are in highly liquid instruments such as government bonds, AAA papers, bank deposits and debt mutual funds. “The investment portfolio is monitored under a strong risk management framework assuring adherence to liquidity objectives. The portfolio is calibrated continually to straddle between the objectives of capital protection, steady returns, and provision of adequate liquidity at short notice,” according to the annual report.

For building the ambitious pan-India 5G network, Jio committed to an investment of ₹2 lakh crore. Jio has deployed 1 million 5G cells until September and covered around 8,000 towns in the network.

RIL also reinvested ₹1,20,868 crore in the group to maintain and develop operations. The refining-to-telecom major is investing Rs 75,000 crore for building five giga factories for renewable energy in Jamnagar. Chairman Mukesh Ambani earlier announced the plan to create an ecosystem for generating 100GW of solar power by 2030 and achieving net carbon zero status by 2035. As part of the project, RIL announced the giga factories --- integrated solar photovoltaic module factory, an advanced energy storage battery factory, an electrolyser factory, a fuel cell factory, and a power electronics factory.

On the retail front, the group is adding stores to spread its network to every town in the country. RRVL has a network of 18,650 stores as of September. It added 3,300 stores in FY23. As the geographical expansion is nearing saturation, the company is now investing in building FMCG business with the launch of new brands and acquisitions.
RIL posted 23.6% growth in revenue to ₹9,74,864 crore in FY23 and a net profit of ₹73,670 crore, which went up 11.3%.