Post the fundraising from rights issue and the stake sale in Jio, RIL’s balance sheet will significantly improve.

After having become a zero net-debt company, oil-to-telecom conglomerate Reliance Industries Ltd (RIL) could be staring at initial public offerings (IPO) for its two flourishing businesses — Jio Platforms and Reliance Retail. According to a Bernstein report, the move is expected to unlock additional value for shareholders, news agency PTI reported. The Mukesh Ambani-led RIL has not just raised Rs 1.15 lakh crore from selling a 24.7 per cent equity stake in Jio platforms but has also managed to launch the Rs 53,000 crore, largest ever rights issue seen by the Indian market and saw it get oversubscribed as well.

“Following the rights issues and the 24.7 per cent sell down in Jio, RIL is now effectively debt free. We expect a break-up of the company in the next three-four years through the IPO of Jio and retail business segment which should further unlock shareholder value,” the report said. Among some of the prominent investors that were seen shopping for a stake in Jio platforms were, social media giant Facebook and Saudi Arabia’s Public investment fund. Facebook will invest Rs 43,574 crore in Mukesh Ambani’s digital telecommunications arm for a 10% equity stake. 

Post the fundraising from rights issue and the stake sale in Jio, RIL’s balance sheet will significantly improve, the report said. Reliance has significantly improved its financial position following the transactions, it said, adding that the net debt to equity will fall significantly from 0.51x in FY20 to 0.06x in FY21 which is the lowest in almost a decade. With Mukesh Ambani now turning his focus towards RIL’s deal with Saudi Aramco, analysts say that net debt to equity could continue to fall beyond financial year 2021. “The key question is what will Reliance do with the significant cash position? We think the priority for now is to reduce other liabilities on the balance sheet such as deferred payments and provisions which total in excess of Rs 50,000 crore,” it said.

Earlier this month domestic brokerage firm Kotak Securities had said that it expects RIL to continue to explore organic and inorganic growth after the mammoth rights issue and Jio stake sale. Analysts at Bernstein hold a similar view. Internet and retail are the sectors where they expect more investment including mergers and acquisitions. “Overall, we expect RIL will continue to invest in growth over returning cash to shareholders,” it said. Earnings are expected to take a hit owing to the coronavirus pandemic, the brokerage said that this could be the start of a secular growth period for RIL nudged by telecom, retail, and new economy-related business.