Billionaire Mukesh Ambani’s Reliance Industries Ltd. is on a mission to reduce debt after racking up $76 billion in capital expenditure in the last five years.
The conglomerate aims to be a zero-net-debt company in 18 months, Asia’s richest man told shareholders Monday. Aiding that effort would be a decision to sell 20% of Reliance’s oil-to-chemicals business to Saudi Arabian Oil Co., or Aramco, at an enterprise value of $75 billion. The company will also start preparing to list its retail and telecommunications units within five years, Ambani said.
The tycoon is cleaning up the group’s finances following years of spending on his wireless carrier, whose entry in 2016 with free calls and cheap data upended the industry and spurred a consolidation. The almost $50 billion plowed into the phone venture, mostly in debt, has raised concerns among analysts including at Credit Suisse Group AG that Reliance’s ballooning borrowings would weigh on growth. Ambani sought to allay those fears.
“With these initiatives, I have no doubt that your company will have one of the strongest balance sheets in the world," he said. “We will also evaluate value unlocking options for our real estate and financial investments."
Reliance had a net debt of ₹1.54 trillion ($22 billion) at the end of March 31, according to Ambani. His plan to carry zero debt would mean the borrowings would fall below the company’s cash reserves, a level not seen since 2013.
Last week, Credit Suisse cut its recommendation for Reliance’s stock and the price target citing reasons including rising liabilities and finance costs. Shares of the company have slumped about 18% from a record reached on May 3, compared with a 3.6% decline in the benchmark S&P BSE Sensex.
Reliance’s debt is backed by “extremely valuable assets," Ambani said, signaling his group isn’t prone to the kind of troubles that have been plaguing many other corporate borrowers in India. The conglomerate controlled by Ambani’s younger brother, Anil, has been struggling to pay creditors while his mobile carrier has slipped into bankruptcy.
Apart from the Aramco deal, Reliance also announced a joint venture with BP Plc this month, under which the European oil major would buy 49% of the Indian firm’s petroleum retailing business. Reliance would receive about 70 billion rupees under this deal.
The “commitments" from the Aramco and BP deals alone are about 1.1 trillion rupees, Ambani said, adding that Reliance will induct “leading global partners" in telecom and retail units in the next few quarters.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.