As Reliance becomes net debt-free, Ambani's ambitions soar higher

Consumer-focussed businesses such as telecom and retail to drive RIL's next decade

How Reliance plans to become a zero debt company in 18 months [File] Chairman of Reliance Industries Limited Mukesh Ambani, with wife Neeta Amban | Amey Mansabdar

Reliance Industries chairman Mukesh Ambani took to the stage at the Birla Matoshree Auditorium in Mumbai on August 12 last year to address shareholders at the annual general meeting and, to a huge applause, announced the company will become net debt-free in about 18 months. That meant that the company, which had a debt of over Rs 1.5 lakh crore at the end of March 2019, would have zero net debt by March 2021. 

On Friday, Ambani announced that the company had become net debt-free way ahead of the schedule—almost nine months before the target. 

The company’s accelerated journey towards reducing its debt was aided by two things. First, it sold a 24.70 per cent stake in its technology subsidiary Jio Platforms to Facebook and other private equity investors and sovereign wealth funds. Second, it raised over Rs 53,000 crore via a rights issue, the largest such issue ever in India.

“Today, I am both delighted and humbled to announce that we have fulfilled our promise to the shareholders by making Reliance net debt-free much before our original schedule of March 31, 2021. Exceeding the expectations of our shareholders and all other stakeholders, again and yet again, is in the very DNA of Reliance,” Ambani said.

The company sold a 9.99 per cent stake in Jio Platforms to social network giant Facebook on April 22 for Rs 43,573.62 crore. Since then, it has raised over Rs 72,120 crore through stake sales in Jio Platforms to several investors, which include Silver Lake Partners, Vista Equity Partners, General Atlantic, KKR, Mubadala, Abu Dhabi Investment Authority, TPG, L Catterton and The Public Investment Fund of Saudi Arabia.

Its rights issue of shares was subscribed 1.59 times and helped it raise additional Rs 53,124 crore. “PIF’s investment marks the end of Jio Platforms’s current phase of induction of financial partners,” RIL said. 

What next for the oils-to-telecom giant?

“Reliance in its golden decade will set even more ambitious growth goals, and achieve them,” said Ambani. While oil refining and petrochemicals shaped Reliance’s past decade, consumer-focussed businesses, viz, telecom and retail, will drive the next decade for RIL. The company is already the largest retailer in the country and its reportedly in talks to acquire a stake in Kishore Biyani’s Future Group, which is weighed down by its own debt pile. 

RIL has recently launched JioMart, which connects local grocery shops to consumers. There were several consumer complaints initially about the quality and service, which the company has since been ironing out and this service will undoubtedly become huge in size and scale. The partnership with Facebook, which also owns WhatsApp that counts India among its largest markets, will only help RIL boost such retail and tech ventures. 

There is also a talk of plans to create a super app as it looks to become India’s Alibaba. 

Though, there may still be some hurdles for RIL. The Competition Commission of India is reviewing the Jio-Facebook deal. Several startups and venture capital firms have also raised data sharing-related concerns and according to a news report, are looking to appeal to the competition regulator.

A few years ago, Facebook had looked to launched Free Basics, a project aimed to provide free access to dozens of websites. However, it had to be discontinued after TRAI ruled it violated net neutrality norms.

Rival telecom companies like Bharti Airtel and Vodafone Idea are facing massive headwinds related to the huge Adjusted Gross Revenue-related dues close to Rs 1.5 lakh crore that they need to pay to the government. The companies have sought a staggered payment over 20 years and the matter is currently being heard in the Supreme Court. Being debt-free and capex largely done for now will provide massive tailwinds for Reliance and Jio. 

Not surprisingly, investors are delighted. Reliance shares were up 1.6 per cent at Rs 1,682 on Friday morning. Over the past one month, the stock has rallied 19 per cent, compared with a 13 per cent rise in the BSE Sensex.