(Bloomberg) — Reliance Industries Ltd., the conglomerate controlled by Asia’s richest man, said it has become free of net debt months ahead of a March 2021 target after raising more than $23 billion from stake sales and a rights issue. Its shares closed at an all-time high.
India’s most valuable company said in a statement Friday that it secured 1.16 trillion rupees ($15.2 billion) by bringing investors including Facebook Inc. and a slew of funds into the digital business at the heart of chairman Mukesh Ambani’s ambition to transform his energy-led empire. Reliance also completed a 531.2-billion rupee share sale to existing shareholders and sold a stake in its energy business to BP Plc.
The 63-year-old tycoon, who made a pledge to shareholders in August to slash the group’s net debt to zero within 18 months, went on a fundraising spree starting late April, despite India being under coronavirus lockdown. After a planned $15 billion stake sale in his oil business to Saudi Arabian Oil Co. stalled, Ambani set out to prove skeptics wrong by luring partners to Jio Platforms Ltd., a technology venture he’s using to pivot Reliance toward e-commerce and digital payments.
“It’s an amazing lockdown achievement,” said Chakri Lokapriya, chief investment officer at TCG Asset Management in Mumbai. “The move tells investors that Reliance is transforming the company’s growth engine to a technology platform.”
Reliance said Friday that it had racked up net debt of 1.6 trillion rupees as of March, most of it for rolling out its wireless carrier, Reliance Jio Infocomm Ltd., which became India’s biggest within three years of its 2016 debut. Reliance’s shares surged 6% to end at an all-time high, taking the company’s market value to $151 billion. The stock has doubled from its March 23 low
“I am both delighted and humbled to announce that we have fulfilled our promise,” Ambani said in the statement.
To be sure, three quarters of the money from the $7 billion rights issue will accrue in the fiscal year starting April 1, 2021. That’s because shareholders had to pay only 25% — or 314.25 rupees a share — on application. The next installment of 314.25 rupees is due in May next year, with the remainder slated for November 2021.
“Leave aside the rights issue, money committed to Jio is real, not indicative or some term sheet,” Lokapriya said. “Besides, cash flow from Reliance’s existing businesses is large enough to service debt that remains until the money from the rights comes in.”
Saudi Arabia’s sovereign fund was the last to invest in Jio Platforms, announcing its decision to plow $1.5 billion on Thursday for a 2.32% stake. The investments — totaling roughly 25% of Jio — now value the equity of Jio at about $64 billion. Reliance said the Saudi inflow marks the end of Jio’s current phase of roping in equity partners.
Jio has attracted more than half the $30 billion investment into telecommunications companies globally this year. Investors are betting on Jio’s access to India’s huge consumer market and its potential to shake up traditional industries in the country — from retail to education and payments — with its technology.
India is the only major open Internet market where foreign technology giants such as Amazon.com Inc., Walmart Inc. and Google’s parent Alphabet Inc. can compete for market share. In a move bolstering Ambani’s ambitions, Reliance is closing in on a deal that would see it acquire stakes in some units of Indian retailer, Future Group, which already has a partnership with Amazon, people familiar with the matter said this week.
“The sheer scale of business opportunity for Reliance Industries in online retail, digital supply chains, education, health care and multiple services industries will allow significant upside over the medium to long term,” TCG’s Lokapriya said.
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