Focus on RIL debt direction
Mukesh Ambani is widely expected to announce the commercial launch of Jio GigaFiber at the 42nd annual general meeting of Reliance Industries Ltd on Monday. The focus will also be on plans to bring down the huge debt at the diversified flagship.
RIL has taken a couple of steps to bring down its debt — it has transferred its fibre and tower undertakings to two independent entities who are under the control of a Sebi-registered infrastructure investment trust. The proceeds from the deal will be used to repay certain existing financial liabilities of Reliance Jio Infratel.
More recently, RIL entered into a joint venture with BP to retail auto fuel and aviation turbine fuel in the country. Though the financial details of the transaction were not disclosed, the joint venture plans to ramp up Reliance’s existing marketing network to 5,500 sites over the next five years. More importantly, some of RIL’s debt will get transferred to the joint venture. The amount of this debt will be known once RIL reaches a financial agreement.
Moreover, over the past few months, there has been a buzz of Saudi Aramco picking up a stake in RIL’s refining and petrochemical business. The speculation intensified amid reports of a cost escalation in the proposed 60-million-tonne refinery-cum-petrochemical complex which Saudi Aramco was planning to set up in Maharashtra with Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Abu Dhabi National Oil Co.
While analysts are divided on whether RIL’s tie-up with BP will impact its stake sale plans in the refining & petrochemical business, the Street will be watching out for any comment from Ambani on further reduction of debt by bringing in a strategic partner in refining and petrochemicals.
“We expect some debt transfer into the JV from the transfer of RIL’s retail fuel marketing business. According to reports, RIL has been in talks with Saudi Aramco for a stake sale in its refining and petchem business. The transfer of the fuel marketing business into a separate JV should not impact any stake sale plans in the core refining and petchem business,” Pinakin Parekh of JP Morgan said in a note.
For the much-awaited fibre-to-the-home services, the focus will be on the pricing. Reports say the base price of Jio GigaFiber will start at Rs 500-600 per month, while voice calls will be free across plans.