Reliance's Debt Path Seen Tied to Telecom, E-Commerce Plans
Reliance Industries’ finance costs has surged eight fold in 5 years.
(Bloomberg) -- Reliance Industries Ltd.’s plan to strengthen its balance sheet will hinge on future capital spending as credit market participants zero in on whether the company will be able to slow those outlays over the next year.
The conglomerate has invested about $64 billion across telecom and retail as well as petrochemicals and oil refining expansions, Joint CFO V. Srikanth said during last week’s earnings briefing. Reliance will probably continue to spend to build capacities in its telecom business as well as on its e-commerce and broadband operations, according to Nitin Tiwari, an analyst with Antique Stock Broking Ltd.
While petrochemicals has been a key driver for the group’s earnings, contributing about half of total operating profit, shrinking profits from converting dirty residual oil into cleaner light fuel pose a headache. However, the company’s balance sheet will be stronger in a year, Srikanth said, as its investment goes down and it transfers its fiber and tower undertakings to separate companies.
Spending on telecom unit Reliance Jio Infocomm Ltd. and rising debt have been “a key worry, and monetization of tower/fiber could allay this,” wrote Mumbai-based Anil Sharma and Ravi Adukia, analysts at Nomura Holdings Inc.
--With assistance from Saket Sundria.
To contact the reporter on this story: Dhwani Pandya in Mumbai at dpandya11@bloomberg.net
To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, Candice Zachariahs, Anto Antony
©2019 Bloomberg L.P.