After two years of being a debt-free company on a net level, oil-to-yarn and retail conglomerate Reliance Industries (RIL) has once again shown a net debt on its balance sheet for the fiscal 2013-14, the company’s latest annual report shows.
The net debt on the books (the difference between its gross debt and the quantum of cash and cash equivalents in hand) is a function of the major capital expenditure programme being undertaken by the company to primarily augment capacity and improve efficiency at its integrated petrochemicals and refining complex at Jamnagar in Gujarat; and to launch its telecom venture.
RIL’s 2013-14 annual report states the Mukesh Ambani-led company is in the process of investing Rs 1.5 trillion across various businesses at the moment. This is the largest capital expenditure programme undertaken by RIL in its four decade history.
On the one hand, while RIL is drawing more debt (mostly foreign currency-denominated) to fund the planned capex, its cash flow from core businesses remains more or less stable, leading to a situation of net debt on the company’s books.
RIL’s total debt, as on 31 March, stood at Rs 89,968 crore (up 24.2% year-on-year). The company’s “cash and marketable securities” at the end of the same period stood at Rs 88,190 crore, up 6.3% over the year earlier. This led to a net debt of around Rs 1,778 crore on the company’s books.
“RIL moved from a net cash position at the beginning of the year, to a marginal net debt level during the course of the year as it drew down on funding to part finance the expansion of its petrochemicals capacities and setting up the new gasification plant and refinery gas off-cracker over the next two-three years,” RIL’s annual report said.
For fiscals 2012-13 and 2011-12, RIL was a cash positive firm. The last fiscal in which the conglomerate has a significant net debt — of R25,004 crore – on its books was in 2010-11.
The reason for RIL being net cash positive in the two previous fiscals before 2013-14 has been the traditional growth model that RIL has followed, entailing alternate cycles of investment and capital creation, followed by cash generation by sweating the assets the created in the previous cycle. Fiscal 2012 and 2013 happened to be a part of the cash generation cycle.
In fiscal 2014 alone, RIL tied up debt facilities to the tune of $3.15 billion