RIL – Net Debt of Rs.37k crores with poor yield on Fund

Reliance Industries Ltd (RIL) had net debt on consolidated basis, as at 31-12-2020, of Rs. 36,889 crore. Gross debt is at Rs. 2,57,413 core and cash equivalents is at Rs. 2,20,524 crore. On start of FY 20-21, RIL had a net debt of Rs. 1,61,035 crore (Gross debt of Rs. 3,36,294 crore less cash equivalent of Rs. 1,75,259 crore). This means, net debt got reduced by Rs. 1,24,146 crore in 9 months of FY20-21.

RIL had received  Rs. 2,20,231 crore in 9 months of FY 20-21, with 32.97% Jio stake monetisation for Rs. 1,52,056 crore, 10.09% stake of Jio Retail for Rs. 47,265 crore, 49% stake of RIL BP for Rs. 7,629 crore, and Rs.13,281 crore, being 25% amount received on Rights issue (balance Rs. 39,843 crore to be received by December 21). In addition to these, RIL had a PAT of Rs. 35,901 crore for 9M FY21.

Inflow of Rs. 2,56,132 crore, but debt reduced by Rs.1,24,146 crore only. Capex of 9 months, is seen largely used from Depreciation of Rs. 19,599 crore, of 9M FY21. So, market and largely FIIs are worried on use of Rs. 1,31,986 crore, paid to Trade Creditors, Current Liabilities and other Financial Liabilities, which were otherwise seen mammoth sum, but shown as current liabilities.

Even market is worried on yield on its Cash equivalent, which is seen at 6% per annum. RIL had an average of Rs.1,90,000 crore for 9M FY21, on which it earned Rs. 8,491 crore, in 9M FY21, as interest income of Rs. 7,278 crore and PBT of Rs. 1,213 crore, from Financial Services segment. This gives an annual yield of 5.96% . Money Managers are questioning rationale of having debt of Rs. 2,57,413 crore and  cash and cash equivalent of Rs. 2,20,524 crore. Even in Q3FY21, interest expenses of Rs. 4,182 crore are way above income and Fin services PBT of Rs. 2,434 crore.

Plenty inflow of money has probably made the treasury managers of the company bit reckless or complacent, who are unable to manage it.  This will definitely be seen reflecting on share price in the future, which is already seen under pressure for this week, post declaration of its Q3 numbers.