Reliance Industries (RIL) is comfortably placed to achieve its target of becoming a zero net debt company by the end of the financial year 2020-21 and the company also is expected to sell another 3 per cent stake during the fiscal, according to a report by Edelweiss Securities.
“Based on its reported net debt of Rs 1.6 trillion (1.6 lakh crore), RIL would comfortably achieve zero net debt by FY21 in our view. We expect RIL to comfortably divest another 3 per cent stake in Jio Platforms this year (cumulatively 20 per cent), given the immense interest shown by investors so far,” it said.
In just around a month RIL has sold over 17 per cent stake in Jio Platforms for a combined Rs 78,562 crore in one month.
The report noted that the balance shortfall of Rs 27,700 crore can be raised through three avenues — stake sale to Aramco, sale of fibre OCPS, higher-than-estimated free cash flow (FCF) and further stake sale in Jio.
As per the report, even a 5 per cent stake sale of O2C assets to Aramco can help fill the shortfall. RIL’s optionally convertible preference shares (OCPS) in fibre assets are worth Rs 77,000 crore based on its internal valuation and can be redeemed to raise capital.
“Working capital management is another lever that RIL has used in the past to its advantage: the company had boosted its operating cash flow by Rs 300 bn in FY20. A repeat of this in FY21 can lift FCF higher than our estimate,” it said.