RIL's Debt Set to Decrease as 5G Rollout Wraps Up in December

04 Dec, 2023

RIL's Debt Set to Decrease as 5G Rollout Wraps Up in December

Reliance Industries, India’s leading company by market valuation, is poised to implement a debt reduction strategy starting in 2024, marking a pivotal shift as it nears the completion of a significant investment phase: the rollout of its 5G network. Company officials indicate a substantial decline in capital expenditure intensity once the 5G rollout concludes by the end of this month. This reduction in capex is expected to play a pivotal role in driving down the net debt, which stood at ₹1,17,727 crore as of September.

The gross debt of Reliance Industries stands at ₹2,95,687 crore, balanced by a cash reserve of ₹1,77,960 crore. Comparing figures from March, the September gross debt reflects a 5.8% reduction. Notably, this debt decrease aligns with a capital raise of ₹10,347 crore in Reliance Retail Ventures Ltd (RRVL) from Qatar Investment Authority (QIA) and KKR during the quarter. Additionally, RRVL raised ₹4,967 crore from the Abu Dhabi Investment Authority (ADIA) in October.

Reliance Industries highlights that robust operating cash flows primarily funded a capex of ₹38,815 crore, primarily directed towards the 5G rollout and bolstering the retail ecosystem, as mentioned in a recent company presentation.

In the fiscal year 2023, Reliance Industries reported a gross debt of ₹3,13,966 crore, a rise from ₹2,66,305 crore in the previous year. This debt encompasses standalone gross debt as well as amounts in key subsidiaries such as Reliance Retail, Reliance Jio, Independent Media Trust Group, and Reliance Sibur Elastomers. The debt service coverage ratio improved to 2.03 in FY23, compared to 1.19 in the previous year, attributed to enhanced earnings and reduced principal repayments, according to the company's annual report.

However, the debt-equity ratio increased to 0.44 from 0.34 in FY22 and was 0.36 in FY21. The cash and cash equivalent portion stood at ₹1,88,200 crore in FY23, declining from ₹2,31,490 crore in the previous year and ₹254,019 crore in FY21. RIL manages these funds through a diversified investment portfolio, including government bonds, AAA papers, bank deposits, and debt mutual funds, ensuring adherence to liquidity objectives.

Jio's commitment to investing ₹2 lakh crore in building the ambitious pan-India 5G network has already seen the deployment of 1 million 5G cells by September, covering approximately 8,000 towns.

Moreover, Reliance Industries reinvested ₹1,20,868 crore in various group operations. It has earmarked Rs 75,000 crore for constructing five giga factories dedicated to renewable energy in Jamnagar. This strategic initiative aims to create an ecosystem capable of generating 100GW of solar power by 2030, with aspirations for achieving net carbon-zero status by 2035.

The retail segment continues its expansion, with RRVL boasting a network of 18,650 stores as of September, having added 3,300 stores in FY23. As geographical expansion approaches saturation, the company now focuses on bolstering its FMCG business, introducing new brands and pursuing acquisitions.

Reliance Industries recorded a remarkable 23.6% revenue growth, amounting to ₹9,74,864 crore in FY23, coupled with a net profit of ₹73,670 crore, marking an 11.3% increase.