Reliance Industries (RIL) net debt will fall 67 percent after the Silver Lake investment, which comes on the heels of the massive deal with Facebook and rights issue announcement during quarterly earnings.

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Last year, the company had a net debt of Rs 1.61 lakh crore, built up as it undertook capital expenditure over the past few years in expanding its telecom and retail ventures, as well as a few projects on the refining side. Of that, the company has already raised Rs 1,09,000 crore counting in the latest investment.

RIL, on Monday, announced that private equity firm Silver Lake will invest nearly Rs 5,655.75 crore in its digital arm Reliance Jio Platforms for 1.1 percent stake. This comes days after securing a Rs 43,574 crore investment from Facebook for a 9.99 percent stake, boosting its efforts to cut debt.

Along with these, the upcoming (Rs 53,125 crore) rights issue and a previous investment by British Petroleum in FY2019-20 (Rs 7,000 crore) have led to this massive decline in RIL's debt.

This latest investment will give the technology subsidiary an equity value of Rs 4.9 lakh crore. This value represents 52 percent of Reliance Industries's market capitalization.

After declaring its quarterly earnings, the company said it would raise Rs 53,125 crore by selling shares at Rs 1,257.

"With strong visibility to these equity infusions, the Board was informed that RIL is set to achieve net-zero debt status ahead of its own aggressive timeline," the company said.

The company today declared quarterly revenue of Rs 1.36 lakh crore and an adjusted profit of Rs 10,813 crore. Its net profit after accounting for a one-time COVID-related impact stood at Rs 6,546 crore.

Looking at the manner in which Reliance Industries has been going about trying to reduce the debt on its books, it could be a countdown to an eventual listing of Jio, the technology subsidiary of Reliance, Saurabh Mukherjea of Marcellus Investment Managers told CNBC-TV18 in an interview.

"Given how clear the chairman (Mukesh Ambani) has been about deleveraging the balance sheet, this looks very much like putting a pre-IPO (initial public offering) valuation imprint on it," Mukherjea said.

Meanwhile, Jal Irani, Senior Vice President, Edelweiss Financial Services, told CNBC-TV18 in an interview that RIL is going through things in a very structured way, not just in its businesses, but also strengthen its balance sheet.

Disclosure:

Network18, the parent company of CNBCTV18.com, is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

First Published:May 4, 2020 1:28 PM IST