Reliance Industries’ acquisitions have increased the company’s debts three-fold over five years as calculated till March 31, 2018
India’s richest man Mukesh Ambani, the chairman and managing director of Reliance Industries unveiled the quite-hyped ‘Jio GigaFiber’ at the 41st annual general meeting (AGM) on Thursday. At zero installation charges, Reliance will be offering the fibre-to-the-home (FTTH) broadband services to its users at a refundable security deposit of Rs 4,500 for the ONT device (GigaHub Home Gateway). As the AGM unfolds throughout the day, let’s take a look at what analysts have to say about the possible discussions.
Reliance Industries have signed US$ 53 billion deals in the last 12 months
Based on the calculations by Jefferies Group LLC and Bloomberg, Reliance Industries have signed at least 12 deals in the past one year worth an estimated Rs 28,900 crore. 10 of these agreements took place in the field of consumer business. Moreover, RIL also made deals with several indebted firms in the current bad-debt scenario that the entire country is experiencing by capitalising a textile-maker, carbon-fibre arm and a telecom company’s wireless wing.
Deven Choksey, managing director at Mumbai-based KR Choksey Shares and Securities said that most of these deals were an initiative to grab the content world. “If you can end up generating enough content, you can be reasonably sure that users will come on their network”
Being a typical telecom company, analysts are expecting that Ambani will discuss how he plans to further implement retail into his telecom background. Furthermore, discussions on how Reliance can clear e-commerce plans might open up possibilities for the company to drive the re-rating of the stock and brokerage CSLA as mentioned in the July 3 analysts report. Jefferies India analysts’ group headed by Somshankar Sinha found that RIL has committed US$ 1.3 billion in acquisition deals till March 31, 2019. Interestingly, these acquisitions, no matter how monetarily significant, exclude the deal with Rhea Retail Pvt Ltd. and a proposed Rs 17,300 crore deals with spectrum, fibre assets and mobile phone towers from Reliance Communications – RIL’s biggest transaction recently. In a nutshell, RIL has made a total of US$ 53 billion deals with several companies belonging to an array of backgrounds – petrochemicals, retail, real estate and not to forget telecom. Of these, telecom romped up the biggest deals accounting for US$ 36 billion. Evidently, RIL’s debts have increased by three times over the course of five years as counted at the end of March 2018.
Analysts express their views on RIL stock
According to Nischal Maheshwari, head of Institutional Equities at Edelweiss Securities said that with the competition in the telecom market that Reliance has brought, it is one stock that one needs to have in its portfolio for the upcoming three to five years. In the latest report by Edelweiss, it said that RIL has conducted commercialisation of several capex-heavy businesses like ROGC, RJIO and down-stream units and ethane project. Besides this, commissioning of pet coke gasification project is probably going to provide essential operating leverage benefits, the report added.